Fundamentals Of Cost Accounting (6th Edition)
6th Edition
ISBN: 9781259969478
Author: WILLIAM LANEN, Shannon Anderson, Michael Maher
Publisher: McGraw Hill Education
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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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After doing an account analysis of cost estimation and giving the results to your boss, you discovered an error in the supporting data. In 6 out of the 24 months of data you had accidentally dropped off the last three 000's from the costs. Therefore, you thought $10,000,000 was only $10,000. You informed your boss about the error, they had already passed on the data to the CFO who was going to use it in a presentation to the board of directors tomorrow. Your boss does not want to tell the CFO about the error. What do you do?
After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 109,000 units of the Sport model and 44,500 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by one-third.
Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility
Activity
Cost Driver
Cost Driver Volume
Sport
Pro
Total
Assembly building
Assembling
Machine-hours
6,900
30,900
37,800
Setting up machines
Setup hours
49
490
539
Handling material
Production runs
17
49
66
Packaging building
Inspecting and…
After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 104,000 units of the Sport model and 42,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 29 percent.
Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility
Cost Driver Volume
Activity
Cost Driver
Sport
Pro
Total
Assembly building
Assembling
Machine-hours
6,400
30,400
36,800
Setting up machines
Setup hours
44
440
484
Handling material
Production runs
12
44
56
Packaging…
Chapter 5 Solutions
Fundamentals Of Cost Accounting (6th Edition)
Ch. 5 - What are the common methods of cost estimation?Ch. 5 - Prob. 2RQCh. 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. 6RQCh. 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...
Ch. 5 - What are some complications that can arise when...Ch. 5 - The following costs are labeled fixed or variable...Ch. 5 - Prob. 13CADQCh. 5 - When preparing cost estimates for account analysis...Ch. 5 - How can one compensate for the effects of price...Ch. 5 - Prob. 16CADQCh. 5 - Prob. 17CADQCh. 5 - A decision maker is interested in obtaining a cost...Ch. 5 - Consider the Business Application item Using...Ch. 5 - A friend comes to you with the following problem....Ch. 5 - After doing an account analysis and giving the...Ch. 5 - In doing cost analysis, you realize that there...Ch. 5 - Prob. 23CADQCh. 5 - Are learning curves likely to affect materials...Ch. 5 - McDonalds, the fast-food restaurant, is known for...Ch. 5 - Prob. 26CADQCh. 5 - A manager asks you for a cost estimate to open a...Ch. 5 - Prob. 28CADQCh. 5 - Methods of Estimating Costs: Engineering Estimates...Ch. 5 - Prob. 30ECh. 5 - Methods of Estimating Costs: Engineering Estimates...Ch. 5 - Prob. 32ECh. 5 - Methods of Estimating Costs: Account Analysis The...Ch. 5 - Methods of Estimating Costs: Account Analysis...Ch. 5 - Methods of Estimating Costs: High-Low, Ethical...Ch. 5 - Methods of Estimating Costs: High-Low Adriana...Ch. 5 - Methods of Estimating Costs: High-Low
Adriana...Ch. 5 - Prob. 38ECh. 5 - Adriana Corporation manufactures football...Ch. 5 - Methods of Estimating Costs: Simple...Ch. 5 - Prob. 41ECh. 5 - Methods of Estimating Costs: High-Low Davis Stores...Ch. 5 - Methods of Estimating Costs: Scattergraph Prepare...Ch. 5 - Prob. 44ECh. 5 - Interpretation of Regression Results: Multiple...Ch. 5 - Interpretation of Regression Results Brodie...Ch. 5 - Prob. 47ECh. 5 - Interpretation of Regression Results: Simple...Ch. 5 - Learning Curves Assume that General Dynamics,...Ch. 5 - Learning Curves Assume that Whee, Cheatham, and...Ch. 5 - Prob. 51ECh. 5 - Learning Curves (Appendix B) Refer to the example...Ch. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Regressions from Published Data Obtain 13 years of...Ch. 5 - Prob. 56PCh. 5 - High-Low Method, Scattcrgraph Cubicle Solutions...Ch. 5 - High-Low Method, Scattcrgraph Academy Products...Ch. 5 - High-Low, Scattergraph, Issues with Data
Wyoming...Ch. 5 - Interpretation of Regression Results: Simple...Ch. 5 - Interpretation of Regression Results: Simple...Ch. 5 - Interpretation of Regression Results: Multiple...Ch. 5 - Interpretation of Regression Results: Simple...Ch. 5 - Interpretation of Regression Results Brews 4 U is...Ch. 5 - Cost Estimation: Simple Regression The following...Ch. 5 - Prob. 68PCh. 5 - Methods of Cost Analysis: Account Analysis, Simple...Ch. 5 - Learning Curves (Appendix B) Refer to the example...Ch. 5 - Learning Curves (Appendix B) Krylon Company...
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- Jane Erickson, manager of an electronics division, was not pleased with the results that had recently been reported concerning the divisions activity-based management implementation project. For one thing, the project had taken eight months longer than projected and had exceeded the budget by nearly 35 percent. But even more vexatious was the fact that after all was said and done, about three-fourths of the plants were reporting that the activity-based product costs were not much different for most of the products than those of the old costing system. Plant managers were indicating that they were continuing to use the old costs as they were easier to compute and understand. Yet, at the same time, they were complaining that they were having a hard time meeting the bids of competitors. Reliable sources were also revealing that the divisions product costs were higher than many competitors. This outcome perplexed plant managers because their control system still continued to report favorable materials and labor efficiency variances. They complained that ABM had failed to produce any significant improvement in cost performance. Jane decided to tour several of the plants and talk with the plant managers. After the tour, she realized that her managers did not understand the concept of non-value-added costs nor did they have a good grasp of the concept of kaizen costing. No efforts were being made to carefully consider the activity information that had been produced. One typical plant manager threw up his hands and said: This is too much data. Why should I care about all this detail? I do not see how this can help me improve my plants performance. They tell me that inspection is not a necessary activity and does not add value. I simply cant believe that inspecting isnt value-added and necessary. If we did not inspect, we would be making and sending more bad products to customers. Required: Explain why Janes division is having problems with its ABM implementation.arrow_forwardBecause of high production-changeover time and costs, a director of manufacturing must convince management that a proposed manufacturing method reduces costs before the new method can be implemented. The current production method operates with a mean cost of $220 per hour. A research study will measure the cost of the new method over a sample production period. Develop the null and alternative hypotheses most appropriate for this study. Comment on the conclusion when H0 cannot be rejected. Comment on the conclusion when H0 can be rejected.arrow_forwardBienestar, Inc., implemented cellular manufacturing as recommended by a consultant. The production flow improved dramatically. However, the company was still faced with the competitive need to improve its cycle time so that the production rate is one bottle every four minutes (15 bottles per hour). The cell structure is shown below; the times above the process represent the time required to process one unit. Required: 1. How many units can the cell produce per hour (on a continuous running basis)? 2. How long does it take the cell to produce one unit, assuming the cell is producing on a continuous basis? 3. What must happen so that the cell can produce one bottle every four minutes or 15 per hour, assuming the cell produces on a continuous basis?arrow_forward
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