Direct Quarter Tons Mined Labor-Hours Utilities Cost Year 1: First.... Second . 5,000 15,000 11,000 21,000 $50,000 $45,000 $60,000 $75,000 3,000 Third 4,000 Fourth 12,000 6,000 .*.. Year 2: $100,000 $105,000 $85,000 $120,000 First .... 18,000 25,000 30,000 28,000 10,000 9,000 8,000 Second Third Fourth...... 11,000
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Least-Squares Regression; Scattergraph; Comparison of Activity Bases
The Hard Rock Mining Company is developing cost formulas for management planning and decision-making purposes. The company’s cost analyst has concluded that utilities cost is a mixed cost, and he is attempting to find a base that correlates with the cost. The controller has suggested that tons mined might be a good base to use in developing a cost formula. The production superintendent disagrees; she thinks that direct labor-hours would be a better base. The cost analyst has decided to try both bases and has assembled the following information:
Required:
1. Using tons mined as the independent variable, prepare a scattergraph that plots tons mined on the horizontal axis and utilities cast on the vertical axis. Using the least-squares regression method, estimate the variable utilities cost per ton mined and the total fixed utilities cost per quarter. Express these estimates in the form Y = a + bX.
2. Using direct labor-hours as the independent variable, prepare a scattergraph that plots direct labor-hours on the horizontal axis and utilities cost on the vertical axis. Using the least-squares regression method, estimate the variable utilities cost per ton mined and the total fixed utilities cost per quarter. Express these estimates in the form Y = a + bX.
3. Would you recommend that the company use tons mined or direct labor-hours as a base for planning utilities cost?
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