Concept explainers
Least-Squares Regression Method; Scattergraph; Cost Behavior L06−1 1
Professor John Morton bas just been appointed chairperson of the Finance Department at Westland University. In reviewing the departments cost records, Professor Morton has found the following total cost associated with Finance 101 over the last five terms:
Professor Moron knows that there are some variable costs, such as amounts paid to graduate assistants, associated with the course, He would like to have the variable and fixed costs separated for planning purposes.
Required:
1. Prepare a scattergraph plot. (Plot total cost on the vertical axis and number of sections offered on the horizontal axis.)
2. Using the least-squares regression method, estimate the stable cost per section and the total fixed cost per term for Finance 101. Express these estimates in the form Y= a + bx .
3. Assume that because of the small number of sections offered during the Winter Term this war, Professor Morton will have to offer eight sections of Finance 101 during the Fall Term. Compute the expected total cost for Finance 101. Can you see any problem with using the cost formula from (2) above to derive this total cost figure? Explain.
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EBK INTRODUCTION TO MANAGERIAL ACCOUNTI
- The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which one has the best average rate of return. Machine A Machine B Machine C $83,087.40 $73,001.40 322,364.00 276,958.00 486,676.00 Estimated average income $45,130.96 Average investment Oa. Machine B Ob. Machine C Oc. Machine A Od. Machines B and C have the same preferred average rate of return.arrow_forwardVariable Costing Income Statement for a Service Company The actual and planned data for Underwater University for the Fall term were as follows: Enrollment Tuition per credit hour Credit hours Registration, records, and marketing costs per enrolled student Revenue Variable costs: Registration, records, and marketing costs $ Instructional costs Total variable costs Instructional costs per credi ur Depreciation on classrooms and equipment Registration, records, and marketing costs vary by the number of enrolled students, while instructional costs vary by the number of credit hours. Depreciation is a fixed cost. Contribution margin Depreciation on classrooms and equipment Operating income $ Actual $ 4,500 Prepare a variable costing income statement showing the contribution margin and operating income for the Fall term. Underwater University Variable Costing Income Statement For the Fall Term $ $120 60,450 $275 $64 $825,600arrow_forwardClassifying Costs as Product or Period Costs Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help finance its growth. The bank requires financial statements before approving the loan. Required: Classify each cost listed below as either a product cost or a period cost for the purpose of preparing financial statements for the bank. 1. Depreciation on salespersons’ cars. 2. Rent on equipment used in the factory. 3. Lubricants used for machine maintenance. 4. Salaries of personnel who work in the finished goods warehouse. 5. Soap and paper towels used by factory workers at the end of a shift. 6. Factory supervisors’ salaries. 7. Heat, water, and power consumed in the factory. 8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.) 9.…arrow_forward
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