COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Chapter 10, Problem 10.21E
Estimating a cost function. The controller of the Javier Company is preparing the budget for 2018 and needs to estimate a cost function for delivery costs. Information regarding delivery costs incurred in the prior two months are:
| Month | Miles Driven | Delivery Costs |
| August | 12,000 | $10,000 |
| September | 17,000 | $13,000 |
- 1. Estimate the cost function for delivery.
Required
- 2. Can the constant in the cost function be used as an estimate of fixed delivery cost per month? Explain.
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Estimating a cost function. The controller of the Javier Company is preparing the budget for 2018 and needs to estimate a cost function for delivery costs. Information regarding delivery costs incurred in the prior two months are:
Estimating a cost function. The controller of the Javier Company is preparing the budget for 2018 and needs to estimate a cost function for delivery costs. Information regarding delivery costs incurred in the prior two months are:
The controller of the
Stump
Company is preparing the budget for
2021
and needs to estimate a cost function for delivery costs. Information regarding delivery costs incurred in the prior 2 months are:
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Requirements
1. Estimate the cost function for delivery.
2. Can the constant in the cost function be used as an estimate of fixed delivery cost per month? Explain.
Requirement 1. Estimate the cost function for delivery.
Delivery costs =
+ (
×
)
Delivery costs =
+ (
×
)
Requirement 2. Can the constant in the cost function be used as an estimate of fixed delivery cost per month? Explain.
The cost function in requirement 1 is an estimate of how costs behave
▼
outside of
within
the relevant range, not at cost levels
▼
outside
within
the relevant range. If there are no months with zero miles driven represented in the delivery cost…
Chapter 10 Solutions
COST ACCOUNTING
Ch. 10 - What two assumptions are frequently made when...Ch. 10 - Describe three alternative linear cost functions.Ch. 10 - What is the difference between a linear and a...Ch. 10 - High correlation between two variables means that...Ch. 10 - Name four approaches to estimating a cost...Ch. 10 - Describe the conference method for estimating a...Ch. 10 - Describe the account analysis method for...Ch. 10 - List the six steps in estimating a cost function...Ch. 10 - When using the high-low method, should you base...Ch. 10 - Describe three criteria for evaluating cost...
Ch. 10 - Define learning curve. Outline two models that can...Ch. 10 - Discuss four frequently encountered problems when...Ch. 10 - Prob. 10.13QCh. 10 - All the independent variables in a cost function...Ch. 10 - Multicollinearity exists when the dependent...Ch. 10 - HL Co. uses the high-low method to derive a total...Ch. 10 - A firm uses simple linear regression to forecast...Ch. 10 - In regression analysis, the coefficient of...Ch. 10 - A regression equation is set up, where the...Ch. 10 - What would be the approximate value of the...Ch. 10 - Estimating a cost function. The controller of the...Ch. 10 - Identifying variable-, fixed-, and mixed-cost...Ch. 10 - Various cost-behavior patterns. (CPA, adapted)....Ch. 10 - Matching graphs with descriptions of cost and...Ch. 10 - Account analysis, high-low. Stein Corporation...Ch. 10 - Account analysis method. Gower, Inc., a...Ch. 10 - Prob. 10.27ECh. 10 - Estimating a cost function, high-low method. Lacy...Ch. 10 - Linear cost approximation. Dr. Young, of Young and...Ch. 10 - Cost-volume-profit and regression analysis....Ch. 10 - Regression analysis, service company. (CMA,...Ch. 10 - High-low, regression. May Blackwell is the new...Ch. 10 - Learning curve, cumulative average-time learning...Ch. 10 - Learning curve, incremental unit-time learning...Ch. 10 - High-low method. Wayne Mueller financial analyst...Ch. 10 - High-low method and regression analysis. Market...Ch. 10 - High-low method; regression analysis. (CIMA,...Ch. 10 - Regression, activity-based costing, choosing cost...Ch. 10 - Interpreting regression results. Spirit...Ch. 10 - Cost estimation, cumulative average-time learning...Ch. 10 - Cost estimation, incremental unit-time learning...Ch. 10 - Regression; choosing among models. Apollo Hospital...Ch. 10 - Multiple regression (continuation of 10-42). After...Ch. 10 - Cost estimation. Hankuk Electronics started...Ch. 10 - Prob. 10.45PCh. 10 - Interpreting regression results, matching time...Ch. 10 - Purchasing department cost drivers, activity-based...Ch. 10 - Purchasing department cost drivers, multiple...
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- Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and Determine Budgeted Cost Refer to the information for Speedy Petes on the previous page. Coefficients shown by a regression program for Speedy Petes data are: Required: Use the results of regression to make the following calculations: 1. Calculate the fixed cost of deliveries and the variable rate per delivery. 2. Construct the cost formula for total delivery cost. 3. Calculate the budgeted cost for next month, assuming that 3,000 deliveries are budgeted. (Note: Round answers to the nearest dollar.) Use the following information for Brief Exercises 3-26 through 3-29: Speedy Petes is a small start-up company that delivers high-end coffee drinks to large metropolitan office buildings via a cutting-edge motorized coffee cart to compete with other premium coffee shops. Data for the past 8 months were collected as follows:arrow_forwardUsing Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and Determine Budgeted Cost Refer to the information for Pizza Vesuvio on the previous page. Coefficients shown by a regression program for Pizza Vesuvios data are: Required: Use the results of regression to make the following calculations: 1. Calculate the fixed cost of labor and the variable rate per employee hour. 2. Construct the cost formula for total labor cost. 3. Calculate the budgeted cost for next month, assuming that 675 employee hours are budgeted. (Note: Round answers to the nearest dollar.) Use the following information for Brief Exercises 3-17 through 3-20: Pizza Vesuvio makes specialty pizzas. Data for the past 8 months were collected:arrow_forwardUsing High-Low to Calculate Predicted Total Variable Cost and Total Cost for Budgeted Output Refer to the information for Speedy Petes above. Assume that this information was used to construct the following formula for monthly delivery cost. TotalDeliveryCost=41,850+(12.00NumberofDeliveries) Required: Assume that 3,000 deliveries are budgeted for the following month of January. Use the total delivery cost formula for the following calculations: 1. Calculate total variable delivery cost for January. 2. Calculate total delivery cost for January.arrow_forward
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- Required: a) Using Activity Based Costing, calculate the rate for each cost driver. b) Using activity based budgeting, prepare a budgeted yearly operating statement for Aero3D Ltd. Show the following separately, within the statement. i. The budgeted output for each product per year; ii. The contribution to profits for each product and in total before charging activity based costs; iii. The profit for each product and in total after charging activity based costs but before charging core costs (non-activity based costs); iv. The total profit after charging core based costs.arrow_forwardWhich of the preceding costs is variable? Fixed? Mixed? Explain.arrow_forwardplease answer within the format by providing formula the detailed workingPlease provide answer in text (Without image)Please provide answer in text (Without image)Please provide answer in text (Without image)arrow_forward
- please answer within the format by providing formula the detailed workingPlease provide answer in text (Without image)Please provide answer in text (Without image)Please provide answer in text (Without image)arrow_forwardDallus wants to examine the behaviour of maintenance costs for budgeting purpose. The following data on machine hours worked and maintenance costs for the past year are collected: Month Machine Hours Maintenance Cost January 18,000 February 15,000 March 12,750 21,000 April May June 11,880 14,500 July 19,000 August 14,880 September 10,000 October 13,360 November 16,600 December 18,800 $20,600 18,900 15,100 22,010 13,200 19,500 25,000 19,874 12,000 15,500 19,800 13,500 Required: a. Use the high-low method to estimate the variable cost per machine hour and the fixed cost per month. b. Plot and comment on the estimated cost function. C. Develop a formula to express the cost behaviour of ABC's maintenance costs. d. According to the budget, the machine is expected to work 200,000 hours next year. How much is the budgeted maintenance costs?arrow_forwardUsing the high-low method, determine the cost function for each cost.arrow_forward
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