EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 9780134475998
Author: Rajan
Publisher: YUZU
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Textbook Question
Chapter 10, Problem 10.35E
High-low method. Wayne Mueller financial analyst at CELL Corporation, is examining the behavior of quarterly utility costs for budgeting purposes. Mueller collects the following data on machine-hours worked and utility costs for the past 8 quarters:
Quarter | Machine-Hours | Utility Costs |
1 | 120,000 | $215,000 |
2 | 75,000 | 150,000 |
3 | 110,000 | 200,000 |
4 | 150,000 | 270,000 |
5 | 90,000 | 170,000 |
6 | 140,000 | 250,000 |
7 | 130,000 | 225,000 |
8 | 100,000 | 195,000 |
- 1. Estimate the cost function for the quarterly data using the high-low method.
- 2. Plot and comment on the estimated cost function.
- 3. Mueller anticipates that CELL will operate machines for 125,000 hours in quarter 9. Calculate the predicted utility costs in quarter 9 using the cost function estimated in requirement 1.
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Wayne Mueller, financial analyst at CELL Corporation, is examining the behav-
ior of quarterly utility costs for budgeting purposes. Mueller collects the following data on machine-hours
worked and utility costs for the past 8 quarters:
Utility Costs
$215,000
Quarter
Machine-Hours
120,000
150,000
200,000
270,000
170,000
250,000
225,000
195,000
2
75,000
110,000
150,000
90,000
140,000
130,000
3
4
5
100,000
1. Estimate the cost function for the quarterly data using the high-low method.
2. Plot and comment on the estimated cost function.
3. Mueller anticipates that CELL will operate machines for 125,000 hours in quarter 9. Calculate the pre-
dicted utility costs in quarter 9 using the cost function estimated in requirement 1.
Dallus wants to examine the behaviour of maintenance costs for budgeting purpose. The
following data on machine hours worked and maintenance costs for the past year are collected:
Month Machine Hours Maintenance Cost
January
18,000
February 15,000
March
12,750
21,000
April
May
June
11,880
14,500
July
19,000
August
14,880
September 10,000
October
13,360
November 16,600
December 18,800
$20,600
18,900
15,100
22,010
13,200
19,500
25,000
19,874
12,000
15,500
19,800
13,500
Required:
a. Use the high-low method to estimate the variable cost per machine hour and the fixed cost
per month.
b. Plot and comment on the estimated cost function.
C. Develop a formula to express the cost behaviour of ABC's maintenance costs.
d. According to the budget, the machine is expected to work 200,000 hours next year. How
much is the budgeted maintenance costs?
High-low method. Wayne Mueller, financial analyst at CELL Corporation, is examining the behavior of quarterly utility costs for budgeting purposes. Mueller collects the following data on machine-hours worked and utility costs for the past 8 quarters:
Chapter 10 Solutions
EBK HORNGREN'S COST ACCOUNTING
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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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