30) Compute the estimated costs for each of the following equations assuming the following costs for July:

 

Fixed manufacturing cost$80,000

Variable cost per machine-hour6

Number of hours used2,000

 

In addition, state whether each is for a variable, fixed, or mixed cost.

 

a.Total estimated costs = intercept

b.Total estimated costs = constant

c.Total estimated costs = constant + (slope × cost driver)

d.Total estimated costs = slope coefficient × cost driver

 

In addition, state whether each is for a variable, fixed, or mixed cost.

 

31) Compute the estimated costs for each of the following equations, assuming the following costs for July:

 

Fixed manufacturing cost$40,000

Variable cost per machine-hour6

Number of hours used1,000

 

In addition, state whether each is for a variable, fixed, or mixed cost.

a.Total estimated costs = intercept

b.Total estimated costs = constant

c.Total estimated costs = constant + (slope × cost driver)

d.Total estimated costs =  slope coefficient × cost driver

 

32) Write a cost estimating equation for each of the following conditions. Use y for estimated costs and X for activity of the cost driver.

 

a.Direct manufacturing labour is $20 per hour.

b.Direct materials cost $8.00 per cubic metre.

c.Utilities have a minimum charge of $2,000 plus a charge of $0.05 per kilowatt hour.

d.Factory supplies average $10 per day plus $1.00 for each machine-hour per day.

e.Total manufacturing amortization includes $5,000 for straight-line plant amortization plus machinery amortization of $100 for each day operated.

Use the information below to answer the following question(s).

 

Miller’s Good Value Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2012 operations.

 

Sales (5,000 microwave ovens)

$1,350,000

Cost of goods sold

540,000

Store manager’s salary per year

75,000

Operating costs per year

225,000

Advertising and promotion per year

25,000

Commissions (4% of sales)

67,500

 

33) What was the variable cost per unit sold for 2012?

 

34) What were total fixed costs for 2012?

 

35) What are the estimated total costs if Miller’s expects to sell 6,500 units next year?

 

36) Which cost estimation method is being used by Miller’s Good Value Appliance Store?

 

 



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