EBK HORNGREN'S COST ACCOUNTING
EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 9780134475950
Author: Datar
Publisher: PEARSON CO
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Chapter 10, Problem 10.38P

Regression, activity-based costing, choosing cost drivers. Sleep Late, a large hotel chain, has been using activity-based costing to determine the cost of a night’s stay at their hotels. One of the activities, “Inspection,” occurs after a customer has checked out of a hotel room. Sleep Late inspects every 10th room and has been using “number of rooms inspected” as the cost driver for inspection costs. A significant component of inspection costs is the cost of the supplies used in each inspection.

Mary Adams, the chief inspector, is wondering whether inspection labor-hours might be a better cost driver for inspection costs. Mary gathers information for weekly inspection costs, rooms inspected, and inspection labor-hours as follows:

Chapter 10, Problem 10.38P, Regression, activity-based costing, choosing cost drivers. Sleep Late, a large hotel chain, has been

Mary runs regressions on each of the possible cost drivers and estimates these cost functions:

  Inspection Costs = $ 193.19 + ( $ 6.26 × Number of rooms inspected ) Inspection Costs = $ 944.66 + ( $ 12.04 × Inspection labor-horns )

  1. 1. Explain why rooms inspected and inspection labor-hours are plausible cost drivers of inspection costs.

  Required

  1. 2. Plot the data and regression line for rooms inspected and inspection costs. Plot the data and regression line for inspection labor-hours and inspection costs. Which cost driver of inspection costs would you choose? Explain.
  2. 3. Mary expects inspectors to inspect 300 rooms and work for 105 hours next week. Using the cost driver you chose in requirement 2, what amount of inspection costs should Mary budget? Explain any implications of Mary choosing the cost driver you did not choose in requirement 2 to budget inspection costs.
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Chapter 10 Solutions

EBK HORNGREN'S COST ACCOUNTING

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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