costacctg13_sm_ch10

# If mason continues to apply pressurekennedy has

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Unformatted text preview: he problem arises because the plant records materials and parts costs on an “as purchased” rather than an “as used” basis. The plot of engineering support restated costs and machine­hours shows a high posit ive correlat ion between the two variables (the coefficient of determinat ion is 0.94); a single linear cost funct ion provides a good fit to the data. Better estimates of the cost relat ion result because Kennedy adjusts the materials and parts costs to an accrual account ing basis. 2. Cost Driver Machine­Hours 73 19 54 Reported Engineering Support Costs \$ 617 1,066 \$ (449) Highest observat ion of cost driver (August) Lowest observat ion of cost driver (September) Difference Slope coefficient, b Difference between costs associated with highest and lowest observations of the cost driver = Difference between highest and lowest observations of the cost driver –\$449 = –\$8.31 per machine­hour 54 Constant (at highest observat ion of cost driver) = \$ 617 – (–\$8.31 ´ 73) = \$1,224 Constant (at lowest observat ion of cost driver) = \$1,066 – (–\$8.31 ´ 19) = \$1,224 The est imated cost funct ion is y = \$1,224 – \$8.31X = Cost Driver Restated Engineering Machine­Hours Support Costs Highest observat ion of cost driver (August) 73 \$966 Lowest observat ion of cost driver (September) 19 370 Difference 54 \$596 Difference between costs associated with highest and lowest observations of the cost driver Slope coefficient, b = Difference between highest and lowest observations of the cost driver = \$596 = \$11.04 per machine­hour 54 Constant (at highest observat ion of cost driver) = Constant (at lowest observat ion of cost driver) = The est imated cost funct ion is y = \$160 + \$11.04 X \$ 966 – (\$11.04 ´ 73) = \$160 \$ 370 – (\$11.04 ´ 19) = \$160 10­40 3. The cost funct ion est imated with eng...
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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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