Compute the cost to produce one helmet
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How does the scattergraph method mitigate this weakness? No beginning or ending inventories of raw material. Note that we are identifying the high and low activity levels rather than the high and low dollar levelsâ€”choosing the high and low dollar levels can result in incorrect high and low points. The y-intercept represents total fixed costs. Solution to Review Problem 5. East Mullett's actual cost of capital is 4%.

The high and low data points may not represent the data set as a whole, and using these points can result in distorted estimates. By the end of the week, the company had manufactured 500 hockey sticks. Explain the reasoning behind your answers. Use the regression analysis cost information for 70 surgeries to prepare a contribution margin income statement. In the cutting department, overhead is applied on the basis of machine hours. Should jack's continue to sell the logs or process them further into lumber? Provide a printout of the results. Calculate the ending inventory of chemicals in gallons for December of the prior year, and for January and February.

Oscuro produces 2 products fudge and chocolate. Question: How are the five steps of the scattergraph method used to estimate total fixed costs and per unit variable cost? Calculate the unit cost for January. Experienced employees may be able to effectively estimate fixed and variable costs by using the account analysis approach. The high and low data points may not represent the data set as a whole, and using these points can result in distorted estimates. Calculate total production costs for the month. Plot the actual costs over time against the upper and lower limits. In practice, however, things are often more complex.

Vasquez Incorporated is trying to identify the cost behavior of the three costs that follow. Instructions a Prepare an answer sheet with the following column headings. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month 80% of its full capacity. Provide a printout of the results. Answer: In reviewing , you will notice that this approach only considers the high and low activity levels in establishing an estimate of fixed and variable costs. Because the financial accounting department tracks information by department, it is able to produce this information. What is the Contribution margin per hour of machine time for each type of sweatshirt? Compute the fixed cost per month.

How many hours of inspection are expected for the coming year? Visually fit a line to the data points and be sure the line touches one data point. How the number of drums that should be produced each month as well as for the quarter in total. The work distribution matrix for the receiving personnel is as follow: Activity % of time on activity Unloading 40% Counting 25 Inspecting 35 Calculate the cost of each activity. Lata inc produces aluminum cans. Mary uses no color illustrations. What is the optimal mix of sweatshirts? Note that the equations presented previously are used for these calculations. Product Costs Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs Assuming that Bell manufactures, on average, 1,500 audio systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings.

What is the total amount owed to Harry by both? Management wants to estimate the cost of production equipment used to produce printers. Why is it important to stay within the relevant range when estimating costs? The scattergraph method gives us an opportunity to review all data points in the data set when we plot these data points in a graph in step 1. Zion manufacturing had always made its component in-house. Thus organizations must estimate their fixed and variable costs. Mary is printing 500 pages and Natalie is printing 1,000 pages. Calculate the activity rates that would be used to assign costs to each product round to 2 decimal places.

Instructions a Prepare an answer sheet with the following column headings. Eric: What do you have for production costs? Provide a printout of the results. Financial accounting systems do not normally sort costs as fixed or variable. Which approach do you think is most accurate and why? Susan did request that her staff prepare a scattergraph and review it for any unusual data points before performing regression analysis. Estimate the total fixed costs f. Bateman chooses its batch size based on the economic order quantity criterion. Although a graph is not required using the high-low method, it is a helpful visual tool.

Calculate the variable cost per unit v. Rent on factory equipment 7,000 Insurance on factory building 1,500 Raw materials plastics, polystyrene, etc. You are the accountant for Eye Care, and management has asked you to devise a way of accurately estimating company costs for planning and decision-making purposes. Accountants who use this approach are looking for an approach that does not simply use the highest and lowest data points. Quality Tools Incorporated would like to estimate costs associated with its sales personnel. Recast your manufacturing overhead budget into a flexible monthly budget for two additional activity levels. What is the contribution to income from processing the logs into lumber? What is the total cost of printing ink and paper for them both? Answer: June may not be a typical month for Bikes Unlimited.

We discuss regression analysis in the next section. What is the total contribution margin earned for the optimal mix? Management wants to estimate the cost of production equipment used to produce the reels. By how much has each department's overhead been overapplied? What does the cost equation look like for each approach at Bikes Unlimited? Using the answers above write the cost formula for tanning services. Comment on whether or not there is a need to investigate any of the variances. Hint: You will only have one line item for variable costs and one line item for fixed costs. Because the production process is highly automated, most of the manufacturing overhead costs are related to machinery and equipment. Software packages like Excel are available to perform regression analysis.

Because the cost equation is based solely on these two points, the resulting estimate of production costs for 400 units of production in part 2 may not be accurate. After a thorough survey of audio system markets, Bell decided to turn its retail store into an audio equipment factory. After consulting with her staff, Susan agreed that regression analysis was the best approach to use in estimating total production costs keep in mind nothing has been done yet with selling and administrative expenses. Calculate total production costs for the month. Although examples of variable and fixed costs were provided in the previous sections, companies typically do not know exactly how much of their costs are fixed and how much are variable. If employees do not have enough experience to accurately estimate these costs, another method should be used.