Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 10, Problem 10.41P
Cost estimation, incremental unit-time learning model. 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.)
- 1. Prepare a prediction of the total costs for producing the six PT109s for the Navy.
Required
- 2. If you solved requirement 1 of Problem 10-40, compare your cost prediction there with the one you made here. Why are the predictions different? How should Pacific Boat decide which model it should use?
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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.
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
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?
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...
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