COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Chapter 10, Problem 10.35E
High-low method. Wayne Mueller financial analyst at CELL Corporation, is examining the behavior of quarterly utility costs for budgeting purposes. Mueller collects the following data on machine-hours worked and utility costs for the past 8 quarters:
| Quarter | Machine-Hours | Utility Costs |
| 1 | 120,000 | $215,000 |
| 2 | 75,000 | 150,000 |
| 3 | 110,000 | 200,000 |
| 4 | 150,000 | 270,000 |
| 5 | 90,000 | 170,000 |
| 6 | 140,000 | 250,000 |
| 7 | 130,000 | 225,000 |
| 8 | 100,000 | 195,000 |
- 1. Estimate the cost function for the quarterly data using the high-low method.
- 2. Plot and comment on the estimated cost function.
- 3. Mueller anticipates that CELL will operate machines for 125,000 hours in quarter 9. Calculate the predicted utility costs in quarter 9 using the cost function estimated in requirement 1.
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Jorgansen Lighting, Incorporated, manufactures heavy-duty street lighting systems for municipalities. The company uses
variable costing for internal management reports and absorption costing for external reports to shareholders, creditors,
and the government. The company has provided the following data:
Inventories:
Beginning (units)
Ending (units)
Variable costing operating income
Year 1
Year 2
Year 3
310
260
260
290
290
350
$ 1,091,400
$ 1,043,400
$ 1,007,400
The company's fixed manufacturing overhead per unit was constant at $670 for all three years.
Required:
1. Determine each year's absorption costing operating income.
Note: Enter any losses or deductions as a negative value.
Reconciliation of Variable Costing and Absorption Costing Operating Incomes
Year 1
Year 2
Year 3
Variable costing operating income
Add (deduct) fixed manufacturing overhead cost deferred in
(released from) inventory under absorption costing
Absorption costing operating income
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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