8th Edition

ISBN: 9781266376771

Author: BREWER

Publisher: MCG

Concept explainers

Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.

Job Costing

Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing …

ABC Costing

Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In compari…

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Textbook Question

Chapter 6.A, Problem 6P

Least-Square. Regression; Scattergraph; Comparison of Activity Bases
The Hard Rock Mining Company is developing cost formulas for management planning and decision-making purposes. The company’s cost analyst has concluded that utilities cost is a mixed cost, and he is attempting to find a base that correlates with the cost. The controller has suggested that tons mined might be a good base to use in developing a cost formula .The production superintendent disagrees, she thinks that direct labor-hours would be a better base. The cost analyst has decided to try both bases and has assembled the following information:
Chapter 6.A, Problem 6P, Least-Square. Regression; Scattergraph; Comparison of Activity Bases The Hard Rock Mining Company is

Required:
1. Using torn mined as the independent variable, prepare a scattergraph that plots tons mined on the horizontal axis and utilities cost on the vertical axis Using the least-squares regression method, estimate the variable utilities cost per ton mined and the total fixed utilities cost per quarter. Express these estimates in the form Y = a + bX.
2. Using direct labor-hours as the independent variable, prepare a scattergraph that plots direct labor-hours on the horizontal axis and utilities cost on the vertical axis. Using the least-squares regression method, estimate the variable utilities cost per direct labor-hour and the total fixed utilities cost per quarter. Express these estimates in the form Y = a+ bX.
3. Would you recommend that the company use tons mined or direct labor-hours as a base for planning utilities cost?

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Chapter 6.A, Problem 5E

Chapter 6.A, Problem 7P

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Solution Summary: The author explains the use of scatter graphs to express the relationship between two variables by using least-square regression method.

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