COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 10, Problem 10.34E
Learning curve, incremental unit-time learning model. Assume the same information for Northern Defense as in Exercise 10-33, except that Northern Defense uses an 85% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours.
(An 85 % learning curve means b = −0.234465.)
- 1. Calculate the total variable costs of producing 2, 3, and 4 units.
Required
- 2. If you solved Exercise 10-33, compare your cost predictions in the two exercises for 2 and 4 units. Why are the predictions different? How should Northern Defense decide which model it should use?
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
10-29 Learning curve, incremental unit-time learning model. Assume the same information for Northern Defense as in Exercise 10-28, except that Northern Defense uses an 85% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours. (An 85% learning curve means b = -0.234465.)
Calculate the total variable costs of producing 2, 3, and 4 units.
If you solved Exercise 10-28, compare your cost predictions in the two exercises for 2 and 4 units. Why are the predictions different? How should Northern Defense decide which model it should use?
Can you provide step by step solution for every requirement?
Requirement 1. Calculate the total variable costs of producing 2, 3, and 4 units assuming that Northern Defense uses an 85% incremental unit-time learning model as a basis for predicting
manufacturing labor-hours.
Begin by calculating the cumulative total time in labor-hours using the incremental unit-time learning model. (Round the individual unit time for Xth unit to the nearest whole number)
Individual unit time for Cumulative total time:
Cumulative
number of units
1
2
Xth unit: Labor-hours
Labor-hours
3
Data table
Direct materials cost
Direct manufacturing labor time for first unit
Learning curve for manufacturing labor time per radar system
Variable manufacturing overhead costs
$ 83,000 per unit of RS-32
Direct manufacturing labor costs
"Using the formula for an 85% learning curve, b=
In 0.85
In 2
-0.162519
0.693147
3,900 direct manufacturing labor-hours
85% incremental unit-time"
20 per direct manufacturing labor-hour
12 per direct manufacturing labor-hour
=-0.234465
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...
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
- Assume the same information for the Pacific Boat Company as in Problem 10-40 with one exception. This exception is that Pacific Boat uses a 90% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours in its assembling operations. (A 90% learning curve means b = -0.152004.) Q. Prepare a prediction of the total costs for producing the six PT109s for the Navy.arrow_forwardPlz correct answer.arrow_forwardUse the following information for the next 2 questions (8 & 9). Division X produces and sells a product to external and internal customers. Per-unit information about its operations include: Selling price per unit to external customers $250 Variable manufacturing costs per unit 115 Fixed manufacturing overhead costs per unit 70 8. If X is operating at capacity and has unlimited external customer demand, what should be the minimum transfer price? 9. If X has sufficient excess capacity to meet internal demand, what should be the minimum transfer price?arrow_forward
- Learning curve, cumulative average-time learning model. Northern Defense manufactures radar systems. It has just completed the manufacture of its first newly designed system, RS-32. Manufacturing data for the RS-32 follow: Calculate the total variable costs of producing 2, 4, and 8 units.arrow_forwardThe graphs below represent cost behavior patterns that might occur in acompany's cost structure. The vertical axis represents total cost, and thehorizontal axis represents activity output. Required:For each of the following situations, choose the graph from the group a-1 that best illustrates the cost pattern involved. Also, for each situation,identify the driver that measures activity output. 1. The cost of power when a fixed fee of $500 per month is chargedplus an additional charge of $0.12 per kilowatt-hour used2. Commissions paid to sales representatives. Commissions arepaid at the rate of 5 percent of sales made up to total annual salesof $500,000, and 7 percent of sales above $500,000.3. A part purchased from an outside supplier costs $12 per part for the first 3,000 parts and $10 per part for all parts purchased inexcess of 3,000 units.4. The cost of surgical gloves, which are purchased in incrementsof 100 units (gloves come in boxes of 100 pairs).5. The cost of tuition at a…arrow_forwardThe management of Hartman Company is trying to determine the amount of each of two products to produce over the coming planning period. The following information concerns labor availability, labor utilization, and product profitability: a. Develop a linear programming model of the Hartman Company problem. Solve the model to determine the optimal production quantities of products 1 and 2. b. In computing the profit contribution per unit, management does not deduct labor costs because they are considered fixed for the upcoming planning period. However, suppose that overtime can be scheduled in some of the departments. Which departments would you recommend scheduling for overtime? How much would you be willing to pay per hour of overtime in each department? c. Suppose that 10, 6, and 8 hours of overtime may be scheduled in departments A, B, and C, respectively. The cost per hour of overtime is 18 in department A, 22.50 in department B, and 12 in department C. Formulate a linear programming model that can be used to determine the optimal production quantities if overtime is made available. What are the optimal production quantities, and what is the revised total contribution to profit? How much overtime do you recommend using in each department? What is the increase in the total contribution to profit if overtime is used?arrow_forward
- Refer to Problem 8.40 for data. Required: 1. Run a multiple regression equation using machine hours, number of setups, and number of purchase orders as independent variables. Prepare a flexible budget for overhead for the 12 months using the results of this regression equation. (Round the regression coefficients to the nearest cent and predicted overhead to the nearest dollar.) Which flexible budget is betterthe one based on simple regression (with machine hours as the only independent variable) or the one based on multiple regression? Why? 2. Now, suppose that the controller remembers that the factory throws two big parties each year, one for the 4th of July and the other for Christmas. Rerun the multiple regression with machine hours, number of setups, and number of purchase orders, and add a dummy variable called Party. (This variable takes the value one for months with a factory-sponsored party, and zero otherwise.) Prepare a flexible budget for the 12 months using the results of this regression. Discuss the implications of using this new regression for decision making.arrow_forwardLet S represent the amount of steel produced (in tons). Steel production is related to the amount of labor used (L) and the amount of capital used (C) by the following function: S=20L0.30C0.70. In this formula L represents the units of labor input and C the units of capital input. Each unit of labor costs 50, and each unit of capital costs 100. a. Formulate an optimization problem that will determine how much labor and capital are needed to produce 50,000 tons of steel at minimum cost. b. Solve the optimization problem you formulated in part (a). (Hint: When using Excel Solver, start with an initial L 0 and C 0.)arrow_forward1. Top-down versus bottom-up estimates. pts. a. Describe the methods and uses of each of the approaches. 2. Compare the advantages and disadvantages of each of the approaches. 3. What are the three types of costs discussed in the text? Define them. 4. For a small project requiring 120 hours at $50/hr and having a direct overhead rate of 40%, calculate the direct cost (Exercise 1 in Chapter 5). To that add indirect costs (G&A) at 20% and then profit at 20% for a total project price. What are the estimated costs for: Design Programming In-house testing Which “approach to estimating” is this? What weaknesses are inherent in this approach? 5. Take another look at Exercise #5. Use Exercise Figure 5.1 on page 160. But now you are asked to do a bottom-up estimate based on the following data and compare it with the top-down estimate of $800,000. If confronted with these two estimates, what, if any, actions would you take? Deliverables Estimated Hours Rate:…arrow_forward
- i need the answer quicklyarrow_forwardStrategic Cost Management Answer questions number 33, 34 and 35.arrow_forwardFanning Academy is a profit-oriented education business. Fanning provides remedial training for high school students who have fallen behind in their classroom studies. It charges its students $730 per course. During the previous year, Fanning provided instruction for 1,000 students. The income statement for the company follows: Revenue Cost of instructors Overhead costs Net income $ 730,000 (434,000) (232,500) $ 63,500 The company president, Andria Rossi, indicated in a discussion with the accountant, Sam Trent, that she was extremely pleased with the growth in the area of computer-assisted instruction. She observed that this department served 300 students using only three part- time instructors. In contrast, the classroom-based instructional department required 28 instructors to teach 700 students. Ms. Rossi noted that the per-student cost of instruction was dramatically lower for the computer-assisted department. She based her conclusion on the following information: Fanning pays its…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
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY