5th Edition

ISBN: 9781259565403

Author: William N. Lanen Professor, Shannon Anderson Associate Professor, Michael W Maher

Publisher: McGraw-Hill Education

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The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on t…

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Textbook Question

Chapter 5, Problem 20CADQ

A friend comes to you with the following problem. “I provided my boss a cost equation using regression analysis. He was unhappy with the results. He told me to do more work and not return until I had a lower cost estimate for one of the variables—the number of machine-hours. My initial analysis covered the last 36 months (proving 36 observations). By dropping four months in which the relation between costs and machine-hours was very high, I was able to get a lower cost estimate for machine-hours. My boss was happy with my new results. Do you think that what I did was unethical?” How would you respond?

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Chapter 5, Problem 19CADQ

Chapter 5, Problem 21CADQ

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Chapter 5 Solutions

Fundamentals of Cost Accounting

Ch. 5 - What are the common methods of cost estimation?Ch. 5 - Prob. 2RQ Ch. 5 - Under what conditions is the engineering estimates...Ch. 5 - If one wishes simply to prepare a cost estimate...Ch. 5 - When using cost estimation methods based on past...Ch. 5 - Prob. 6RQ Ch. 5 - What is the difference between R2 and adjusted R2?Ch. 5 - Why are accurate cost estimates important?Ch. 5 - What are three practical implementation problems...Ch. 5 - Why is it important to incorporate learning into...

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Solution Summary: The author explains that the executive dropped four months to lower the machine hours to reduce the cost estimation. If there is no valid reason behind the hours cut, it will be considered unethical.

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