Unformatted text preview: hinery is in operation. Answer: a. y = $.75X
b. y = $16.75X
c. y = $75 +
$0.50X
d. y = $350 + $5X Diff: 1 Terms: linear cost function Objective: 1 AACSB: Analytical skills 162) The cost of the personnel departme
nt at the Miller Company has always been charged to the productio
n departments based upon number of employees. Recently, opinions gathered from the department managers indicated that the number of new hires might also be a predictor of personnel costs to be assigned. Total personnel department costs are $120,000.
Department
Department
Department
Cost Driver
A
B
C
Number of employees
300
250
50
The number of new hires
15
25
10
Required:
Using the above data, prepare a report that contrasts the different amounts of personnel department cost that would be allocated to each of the production departments if the cost driver used is
a. number of employees.
b. the number of new hires.
c. Which cost estimation method is being used by Miller Company? Answer: Department
Department
Department
Cost Driver A
BC
a. Number of employees
300/600
250/600
50/600
$60,000
$50,000
$10,000
b. The number of new hires
15/50
25/50
10/50
$36,000
$60,000
$24,000
c. Miller Company is using the conference method for cost estimation. Diff: 2 Terms: conference method, cost estimation Objective: 3 AACSB: Communication 163) The n levels of 20X2 and 20X4 as examples of the highest and lowest years of operating levels. Data for those years are as managers follows: of the productio
Year
Chemicals used
Overhead Costs
n 20X2
140,000 gallons
$115,000
departme
20X4
120,000 gallons
$100,000
nt have decided to Required: use the productio What is the cost estimating equation for the department if gallons of chemicals are used as the cost driver? Answer: Slope (variable cost)
= ($115,000 $100,000) / (140,000  120,000) = $0.75 Constant (fixed cost)
= $100,000 $0.75(120,000) =
$10,000 Estimating equation
= $10,000 +
$0.75DM Diff: 1 Terms: cost estimation, slope coefficient, constant Objective: 4 AACSB: Analytical skills 164) Wimmer's for 360 ho...
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 Spring '08
 BROWN
 AACSB, Reflective thinking

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