1 costtoproducethe2ndthroughthe8thboats

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Unformatted text preview: vening mo nths, when production vo lume is low. To correctly understand the relat ionship between machine­hours and maintenance costs, Brickman should est imate the regressio n equation of maintenance costs on lagged (i.e., previous mo nths’) machine­hours. The greater the machine use in one mo nth, the greater is the expected maintenance costs in later months. 3. The negat ive coefficient on advert ising expenditure in the second regression can likely be explained by (1) the fact that advertising during a particular period increases sales revenues in subsequent periods (2) the possibilit y that Brickman may be increasing advert ising outlays during periods of declining sales in an attempt to clear out its end­of­season merchandise. Brickman should therefore est imate the relat ionship between advert ising costs in a part icular period and sales in future periods. In fact, Brickman’s market ing and sales staff may be able to provide a good sense of what the time lag should be—how long before advertising has an effect on sales. 10­26 10­36 (30–40 min.) Cost estimation, cumulative average­time learning curve. 1. Cost to produce the 2nd through the 8th troop deployment boats: Direct materials, 7 ´ $100,000 $ 700,000 1 Direct manufacturing labor (DML), 39,130 ´ $30 1,173,900 Variable manufacturing overhead, 39,130 ´ $20 782,600 Other manufacturing overhead, 25% of DML costs 293,475 Total costs $2,949,975 1 The dir ect ma nufacturing labor­hours to produce the second to eighth boats can be calculated in several ways, given the assumption of a cumulative average­time learning curve of 85%: Use of table for mat: 85% Learning Curve Cumulative Average Time per Unit (y): Labor Hours (2) 10,000.00 8,500.00 = (10,000 ´ 0.85) 7,729.00 7,225.00 = (8,500 ´ 0.85) 6,856.71 6,569.78 6,336.56 6,141.25 = (7,225 ´ 0.85) Cumulative Total Time: Labor­Hours (3) = (1) ´ (2) 10,000 17,000 23,187 28,900 34,284 39,419 44,356 49,130 Cumulative Number of Units (X) (1) 1 2 3 4 5 6 7 8 The direct labor­hours required to produce the second thr ough the eighth boa...
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This note was uploaded on 10/11/2010 for the course ACCT 321 taught by Professor Cole during the Spring '10 term at University of Miami.

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