COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Chapter 10, Problem 10.25E
Account analysis, high-low. Stein Corporation wants to find an equation to estimate some of their monthly operating costs for the operating budget for 2018. The following cost and other data were gathered for 2017:
- 1. Which of the preceding costs is variable? Fixed? Mixed? Explain.
Required
- 2. Using the high-low method, determine the cost function for each cost.
- 3. Combine the preceding information to get a monthly operating cost function for the Stein Corporation.
- 4. Next month, Stein expects to use 400 machine hours, have 80 employees, and ship 9,000 units. Estimate the total operating cost for the month.
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Students have asked these similar questions
Using the high-low method, determine the cost function for each cost.
Which of the preceding costs is variable? Fixed? Mixed? Explain.
Armer Company is accumulating data to use in preparing its annual profit plan for the coming year.
The cost behavior pattern of the maintenance costs must be determined. The accounting staff has
suggested the use of linear regression to derive an equation for maintenance hours and costs.
Data regarding the maintenance hours and costs for the last year and the results of the regression
analysis follow:
Maintenance
Machine
Month
Cost
Hours
$ 4,200
Jan.
480
Feb.
3,000
320
Mar.
3,600
400
Apr.
2,820
300
May
4,350
500
June
2,960
310
July
3,030
320
Aug.
4,470
520
Sept.
4,260
490
Oct.
4,050
470
Nov.
3,300
350
Dec.
3,160
340
Sum
$43, 200
4,800
$ 3,600
$
$
$ 684.65
Average
400
Average cost per hour
a (intercept)
b (coefficient)
9.00
7.2884
Standard error of the estimate
34.469
R-squared
0.99724
t-value for b
60.105
At 400 hours of activity, Armer management can be approximately two-thirds confident that the
maintenance costs will be in the range of
Chapter 10 Solutions
COST ACCOUNTING
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