Question : 81) Andrew Pallet Co., Inc. manufactures pallets for various manufacturing companies. : 1196052

 

81)

Andrew Pallet Co., Inc. manufactures pallets for various manufacturing companies. Each new employee takes 10 hours to make the first pallet and 8 hours to make the second. The manufacturing overhead charge per hour is $80.

 

Required:

 

a.What is the learning curve percentage assuming the cumulative average method?

b.What is the time needed to build 8 pallets by a new employee using the cumulative average-time method? Assume the rate of learning factor is -0.1520.

c.What is the time needed to produce the 16th pallet by a new employee using the incremental unit-time method? Assume the rate of learning factor is -0.3219. 81)

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82)

Harry’s Picture manufactures various picture frames.

Each new employee takes 5 hours to make the first

picture frame and 4 hours to make the second.

The manufacturing overhead charge per hour is $20.

 

Required:

a.What is the learning-curve percentage, assuming the cumulative average method?

b.What is the time needed to build 8 picture frames by a new employee using the cumulative average-time method?

Assume the rate of learning factor is

-0.1520.

c.What is the time needed to produce the 16th frame by a new employee using the incremental unit-time method?

Assume the rate of learning factor is -0.3219.

 82)

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83)

A Manufacturing Company uses two different independent variables in two different equations to evaluate the cost activities of the packaging department, machine-hours and number of packages. The most recent month’s results of the two regressions are as follows:

 

Machine hours:

 

Variable              Coefficient   Standard Error  t-Value

Constant652.32209.753.11

Independent Variable44.30 24.611.88

= 0.29

 

Number of packages:

 

Variable              Coefficient    Standard Errort-Value

Constant65.0875.042.20

Independent Variable4.302.002.15

= 0.61

 

Required:

 

a.What are the estimating equations for each cost driver?

b.Which cost driver is best and why? 83)

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84)

Review the following report of the results of a simple regression program for cost estimation.

 

Variable              Coefficient   Standard Error  t-Value

Constant24.8817.901.39

Independent Variable444.70179.312.48

= 0.72

 

Required:

 

a.What is the cost estimation equation according to the report?

b.What is the goodness of fit? What does it tell about the estimating equation? 84)

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85)

Newton Company used least squares regression analysis to obtain the following output:

 

Payroll Department Cost

Explained by Number of Employees

Constant$5,800

Standard error of Y estimate630

r20.8924

Number of observations20

 

X coefficient(s)$1.902

Standard error of coefficient(s)0.0966

 

Required:

a.What is the total fixed cost?

b.What is the variable cost per employee?

c.Prepare the linear cost function.

d.What is the coefficient of determination?

Comment on the goodness of fit.

 85)

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86)

Schotte Manufacturing Company uses two different independent variables (machine-hours and number

of packages) in two different equations to evaluate costs of the packaging department.

The most recent

results of the two regressions are as follows:

 

Machine-hours:

VariableCoefficientStandard Errort-Value

Constant$748.30$341.202.19

Independent Variable $52.90$35.201.50

 

r2 = 0.33

 

Number of packages:

VariableCoefficientStandard Errort-Value

Constant$242.90$75.043.24

Independent Variable$5.60$2.002.80

 

r2 = 0.73

 

Required:

a.What are the estimating equations for each cost driver?

b.Which cost driver is best and why?

 86)

_____________

87)

The two usual assumptions behind a simple linear cost function are:

1) Variations in the level of a single activity (the cost driver) explain the variations in the related total costs; and

2) Cost behavior is approximated by a linear cost function within the relevant range.

This means that total cost versus the level of a single activity that is related to that cost is a straight line within the relevant range.

 

Once linearity is established, there are three possible types of linearity:

1) A strictly variable cost of the form Y = bX, where b is the slope of the straight line and is the variable cost per unit of the cost driver;

2) A strictly constant cost of the form Y = a, where a is the total fixed cost or constant; and

3) A mixed or semivariable cost of the form Y = a + bX, where a is the total fixed cost or constant, and b is the variable cost per unit of the driver or the slope of the straight line.