Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 10, Problem 10.30E
Cost-volume-profit and regression analysis. Relling Corporation manufactures a drink bottle, model CL24. During 2017, Relling produced 210,000 bottles at a total cost of $808,500. Kraff Corporation has offered to supply as many bottles as Relling wants at a cost of $3.75 per bottle. Relling anticipates needing 225,000 bottles each year for the next few years.
- a. What is the average cost of manufacturing a drink bottle in 2017? How does it compare to Kraff’s offer?
Required
- b. Can Relling use the answer in requirement 1a to determine the cost of manufacturing 225,000 drink bottles? Explain.
- 2. Relling’s cost analyst uses annual data from past years to estimate the following regression equation with total
manufacturing costs of the drink bottle as the dependent variable and drink bottles produced as the independent variable:
During the years used to estimate the regression equation, the production of bottles varied from 200,000 to 235,000. Using this equation, estimate how much it would cost Relling to manufacture 225,000 drink bottles. How much more or less costly is it to manufacture the bottles than to acquire them from Kraff?
- 1. What other information would you need to be confident that the equation in requirement 2 accurately predicts the cost of manufacturing drink bottles?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Cost-volume-profit and regression analysis. Relling Corporation manufactures a drink bottle, model CL24. During 2017, Relling produced 210,000 bottles at a total cost of $808,500. Kraff Corporation has offered to supply as many bottles as Relling wants at a cost of $3.75 per bottle. Relling anticipates needing 225,000 bottles each year for the next few years.
In the upcoming year, NUBD estimates that it will produce and sell 4,000 units. The variable costs per unit and the total fixed costs are expected to be the same as in the current year. However, it anticipates a sales price of P16 per unit. What is Value Pro's projected margin of safety for the coming year?
A company is planning a new product. Market research information suggests that the product should sell 20,000 units at $35.00/unit. The company seeks to make a margin of 20% on sales. It is estimated that the lifetime costs of the product will be as follows:
a. Research and development costs $60,000
b. Manufacturing costs $25/unit
c. Decommissioning Costs $40,000
What is the Target Cost per unit?
What is the original lifecycle cost per unit?
Chapter 10 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
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...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Grove Audio is considering the introduction of a new model of wireless speakers with the following price and cost characteristics. Sales price $ 433.00 per unit Variable costs 193.00 per unit Fixed costs 645,000 per year Assume that the projected number of units sold for the year is 3,900. Consider requirements (b), (c), and (d) independently of each other. Questions: What will the operating profit be? What is the impact on operating profit if the sales price decreases by 20 percent? Increases by 10 percent? What is the impact on operating profit if variable costs per unit decrease by 10 percent? Increase by 20 percent? Suppose that fixed costs for the year are 20 percent lower than projected, and variable costs per unit are 10 percent higher than projected. What impact will these cost changes have on operating profit for the year? Will profit go up? Down? By how much?arrow_forwardAn industry is going to launch a new product in the market in the year 2018. The data pertaining to the costs and the estimated sales is provided as follows 1. Fixed cost for the year 2018-2019 is 20000$. 2. The variable cost per unit is 12$. 3. The estimated sales are 800000$. 4. If each unit is sold at 30$. Find out 1. Break-even point. 2. The profit at a turn-over of 25000 units. 3. Margin of safety in terms of units and sales. 4. If a profit target is 1200000$, compute the turn over required. 5. Also construct the break-even chart and show the details on it.arrow_forwardGrove Audio is considering the introduction of a new model of wireless speakers with the following price and cost characteristics. Sales price $ 438.00 per unit Variable costs 198.00 per unit Fixed costs 680,000 per year Assume that the projected number of units sold for the year is 4,150. Consider requirements (b), (c), and (d) independently of each other. Required: What will the operating profit be? What is the impact on operating profit if the sales price decreases by 20 percent? Increases by 10 percent? What is the impact on operating profit if variable costs per unit decrease by 10 percent? Increase by 20 percent? Suppose that fixed costs for the year are 20 percent lower than projected, and variable costs per unit are 10 percent higher than projected. What impact will these cost changes have on operating profit for the year? Will profit go up? Down? By how much? omplete this question by entering your answers in the tabs below. Required A Required B…arrow_forward
- Relling Corporation manufactures a drink bottle, model CL24. During 2017, Relling produced 210,000 bottles at a total cost of $808,500. Kraff Corporation has offered to supply as many bottles as Relling wants at a cost of $3.75 per bottle. Relling anticipates needing 225,000 bottles each year for the next few years. Q. Can Relling use the answer in requirement 1a to determine the cost of manufacturing 225,000 drink bottles? Explain.arrow_forwardGarcia Corporation manufactures a drink bottle, model CL24. During 2020, Garcia produced 190,000 bottles at a total cost of $674,500. Beecher Corporation has offered to supply as many bottles as Garcia wants at a cost of $3.45 per bottle. Garcia anticipates needing 205,000 bottles each year for the next few years. Read the requirements. Requirement 1a. What is the average cost of manufacturing a drink bottle in 2020? How does it compare to Beecher's offer? The average cost of per bottle is than Beacher's offer Requirement 1b. Can Garcia use the answer in requirement 1a to determine the cost of manufacturing 205,000 drink bottles? Explain. take the average manufacturing cost in 2020 to determine the total cost of manufacturing 205,000 drink bottles. The reason is that Garcia Requirement 2. Garcia's cost analyst uses annual data from past years to estimate the following regression equation with total manufacturing costs of the drink bottle as the dependent variable and drink bottles…arrow_forwardHow much will profit decrease by?arrow_forward
- Thank you.arrow_forward(1) A company sells its products for $50 per unit. It has annual fixed cost of $300,000 and variable costs of $20 per unit. The company has a capacity to make 100,000 units per year. (a) How many units must be sold to breakeven? (b) What is the percentage of capacity at breakeven? (c) What is the profit at 25,000 units?arrow_forwardGrove Audio is considering the introduction of a new model of wireless speakers with the following price and cost characteristics. Sales price $ 450.00 per unit Variable costs 210.00 per unit Fixed costs 764,000 per year Assume that the projected number of units sold for the year is 4,750. Consider requirements (b), (c), and (d) independently of each other. What will the operating profit be? What is the impact on operating profit if the sales price decreases by 20 percent? Increases by 10 percent? What is the impact on operating profit if variable costs per unit decrease by 10 percent? Increase by 20 percent? Suppose that fixed costs for the year are 20 percent lower than projected, and variable costs per unit are 10 percent higher than projected. What impact will these cost changes have on operating profit for the year? Will profit go up? Down? By how much?arrow_forward
- Please help me. Fast solution please. Thankyou.arrow_forwardUsing sensitivity analysis The Circle Clock Company sells a particular clock for $25. The variable costs are $13 per clock and the breakeven point is 250 clocks. The company expects to sell 300 clocks this year. If the company actually Sells 400 clocks, what effect would the sale of additional 100 clocks have on operating income? Explain your answer.arrow_forwardA coat manufacturer wants to build a large factory or a small factory. The profit per coat is estimated as $12. Per year, a small factory's cost is $200,000, with a production capacity of 50,000 coats and a large factory's cost is $450,000, with a production capacity of 100,000 coats. The four levels of manufacturing demand that are considered likely are 30,000, 40,000, 50,000, and 100,000 coats per year. Complete parts (a) through (e). a. Determine the payoffs for the possible levels of production for a small factory. Manufacturing demand (coats per year) Payoff ($) 30,000 40,000 50,000 100,000 (Simplify your answers.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cost-Volume-Profit (CVP) Analysis and Break-Even Analysis Step-by-Step, by Mike Werner; Author: Accounting Step by Step;https://www.youtube.com/watch?v=D0MOfse9OWk;License: Standard Youtube License