*(A) The Mortise Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Mortise has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation. Month Cost Hours January $40,000 3,600 February 38,500 3,000 March 36,280 3,300 April 38,000 3,500 May 69,850 5,850 June 45,000 4,250 Required: a. What is the slope coefficient? b. What is the constant for the estimated cost equation? c. What is the estimated cost function for the above data? d. What is the estimated total cost at an operating level of 3,100 hours?
*(A)
The Mortise Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Mortise has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.
Month Cost Hours
January $40,000 3,600
February 38,500 3,000
March 36,280 3,300
April 38,000 3,500
May 69,850 5,850
June 45,000 4,250
Required:
a. What is the slope coefficient?
b. What is the constant for the estimated cost equation?
c. What is the estimated cost function for the above data?
d. What is the estimated total cost at an operating level of 3,100 hours?
*(B)
The XYY company has received an initial order for eight of its products (GGG). The information about products as follows:
- Direct material cost per (GGG) $ 100,000
- Direct- assembly labor time for first GGG 4,000 labor-hours
- Learning curve for assembly labor time per GGG 80% cumulative average time
- Direct -assembly labor cost $ 50 per hour
- Equipment-related indirect
- Material-handling-related indirect manufacturing cost 40% of direct material cost
- Fixed cost $ 400,000
- b = –0.25
Required
1. How many direct-assembly labor-hours are required to assemble the first eight products?
2. What is the total cost of assembling the first eight products using learning carve?
3. What is the total cost of assembling the first eight products without learning carve?
*(C)
Write a linear cost function equation for each of the following conditions. Use y for estimated costs and X for activity of the cost driver.
a. Direct materials cost is $1.70 per pound.
b. Total cost is fixed at $8,000 per month regardless of the number of units produced.
c. Auto rental has a fixed fee of $80.00 per day plus $2.00 per mile driven.
d. Machine operating costs include $1,000 of maintenance per month, and $12.00 of coolant usage costs for each day the machinery is in operation.
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