Managerial Accounting: Creating Value in a Dynamic Business Environment
11th Edition
ISBN: 9781259569562
Author: Ronald W Hilton Proffesor Prof, David Platt
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 6, Problem 28E
The Iowa City Veterinary Laboratory performs a variety of diagnostic tests on commercial and domestic animals. The lab has incurred the following costs over the past year.
Required:
- 1. Plot the data above in a scatter diagram. Assign cost to the vertical axis and the number of diagnostic tests to the horizontal axis. Visually fit a line to the plotted data.
- 2. Using the visually fit line, estimate the monthly fixed cost and the variable cost per diagnostic test.
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The Iowa City Veterinary Laboratory performs a variety of diagnostic tests on commercial and domestic animals. The lab has incurred the following costs over the past year.
Required:1. Plot the data above in a scatter diagram. Assign cost to the vertical axis and the number of diagnostic tests to the horizontal axis. Visually fit a line to the plotted data.2. Using the visually fit line, estimate the monthly fixed cost and the variable cost per diagnostic test.
The manager of the main laboratory facility at UrbanFit Center is interested in being able to predict the overhead costs each month for the lab. The manager believes that total overhead varies with the number of lab tests performed I
that some costs remain the same each month regardless of the number of lab tests performed. The lab manager collected the following data for the first seven months of the year.
(Click the icon to view the data.)
Use the high-low method to determine the laboratory's cost equation for total laboratory overhead. Use your results to predict total laboratory overhead if 3,500 lab tests are performed next month.
Let's begin by determining the formula that is used to calculate the variable cost (slope).
Data table
Variable cost (slope)
Number of Lab
Month
Tests Performed
Total Laboratory
Overhead Costs
January
2,800
$21,500
February
2,600
$22,700
March
3,100
$27,900
April....
3,550
$31,400
May
3,700
$28,500
June..
1,200
$19,500
July
1,400
$14,500
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Assume that the manager of the rehabilitation department of Getwell Hospital is setting the price on a new outpatient service for electrical stimulation of muscles. Here are the relevant data estimates:
Variable cost per visit: $15.00
Annual direct fixed costs: $650,000
Annual overhead allocation: $75,000
Expected annual visits: 8,000
What price per visit must be set for the service to breakeven?
Chapter 6 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 6 - Describe the importance of cost behavior patterns...Ch. 6 - Define the following terms, and explain the...Ch. 6 - Suggest an appropriate activity base (or cost...Ch. 6 - Draw a simple graph of each of the following types...Ch. 6 - Explain the impact of an increase in the level of...Ch. 6 - Explain why a manufacturers cost of supervising...Ch. 6 - Explain the impact of an increase in the level of...Ch. 6 - Prob. 8RQCh. 6 - Indicate which of the following descriptions is...Ch. 6 - Prob. 10RQ
Ch. 6 - What is meant by a learning curve? Explain its...Ch. 6 - Suggest an appropriate independent variable to use...Ch. 6 - What is an outlier? List some possible causes of...Ch. 6 - Explain the cost estimation problem caused by...Ch. 6 - Describe the visual-fit method of cost estimation....Ch. 6 - What is the chief drawback of the high-low method...Ch. 6 - Explain the meaning of the term least squares in...Ch. 6 - Prob. 18RQCh. 6 - Prob. 19RQCh. 6 - List several possible cost drivers that could be...Ch. 6 - Prob. 21RQCh. 6 - Prob. 22ECh. 6 - The behavior of the annual maintenance and repair...Ch. 6 - WMEJ is an independent television station run by a...Ch. 6 - Jonathan Macintosh is a highly successful...Ch. 6 - Jonathan Macintosh is a highly successful...Ch. 6 - The Iowa City Veterinary Laboratory performs a...Ch. 6 - Chillicothe Meat Company produces one of the best...Ch. 6 - Rio Bus Tours has incurred the following bus...Ch. 6 - Prob. 31ECh. 6 - Prob. 32ECh. 6 - Prob. 33ECh. 6 - Gator Beach Marts, a chain of convenience grocery...Ch. 6 - For each of the cost items described below, choose...Ch. 6 - The following selected data were taken from the...Ch. 6 - Antioch Extraction, which mines ore in Montana,...Ch. 6 - Nations Capital Fitness, Inc. operates a chain of...Ch. 6 - The Allegheny School of Music has hired you as a...Ch. 6 - Prob. 40PCh. 6 - (Note: Instructors who wish to cover all three...Ch. 6 - Refer to the original data in the preceding...Ch. 6 - Shortly after being hired as an analyst with...Ch. 6 - The controller of Chittenango Chain Company...Ch. 6 - Dana Rand owns a catering company that prepares...Ch. 6 - Madison County Airport handles several daily...Ch. 6 - Earth and Artistry, Inc. provides commercial...Ch. 6 - Prob. 48CCh. 6 - Refer to the data and accompanying information in...
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