What additional information would you like to see? Be specific.
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93. The Heidi Company produces a single product and has total costs ranging from $321,875
(at 20,000 units) to $966,875 (at 80,000 units). Sales volume in 2012 was 32,000, and operating
income was $45,125. Heidi’s product is highly specialized; therefore, no units are kept in
inventory.
Required:
(a.) Determine the cost equation for Heidi’s costs.
(b.) Prepare a contribution margin income statement for 2012 including separate columns for total
dollars, per unit dollars, and percentages.
(c.) Determine the break-even point (in units and in dollars).
94. Teeger Enterprises had an average cost of $10.75 during a month when 50,000 units were
produced. When production doubled several months later, the average cost dropped to $8.25.
Required:
(a.) Determine the fixed and variable portions of production costs.
(b.) What will unit cost be when production equals 80,000 units?
95. Sharona Products had costs of $600,000 when sales equaled 75,000 units. When sales
increased by 25,000 units, costs increased by $125,000. The selling price is $9 per unit.
Required:
(a.) Determine the fixed and variable portions of costs.
(b.) Prepare a contribution margin income statement for a month with sales of 80,000 units.
96. Braxton, Inc. has received a contract for 8 units of a new product. The contract is a cost–
plus contract, with the total to be received equal to the total labor cost + 20%. Braxton found that
the first unit of a new product required 120 hours to complete. The second unit was completed
using only 114 hours. Braxton believes that the rate of learning that was observed will continue for
all 8 units of the contract. The labor wage paid is $25/hour. The following factors are available for
various rates of learning: 80% learning, b = -.3219; 85%, b = -.2345; 90%, b = -.1520; 95%, b = –
.0740.
Required:
(a.) What will the total labor cost be for the contract?
(b.) What will the total fee be for the contract?
97. Getz Products, Inc., has found that new products follow a learning curve. The first two
units have been completed with the following results:
Required:
(a.) How much time will be needed to complete the 4th unit?
(b.) How much time will be needed to complete the 8th unit?
(c.) How much time will be needed to complete the 16th unit?
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98. Cameron Company is interested in establishing the relationship between utility costs and
machine hours. Data have been collected and a regression analysis prepared using Excel. The
monthly data and the regression output follow:
Required:
(a.) What is the equation for utility costs using the regression analysis?
(b.) Does the variable “machine hours” have statistical significance? Explain.
(c.) Prepare an estimate of utility costs for a month when 3,000 machine hours are worked.
99. Cameron Company is interested in establishing the relationship between utility costs and
machine hours. Data have been collected and a regression analysis prepared using Excel. The
monthly data and the regression output follow:
Required:
(a.) What is the equation for utility costs using the high-low method?
(b.) Prepare an estimate of utility costs for a month when 3,000 machine hours are worked.
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100. Hawley Corp. wants to develop a cost equation for its administrative costs. The controller
believes the appropriate cost driver is units produced. Last year’s data are presented below:
Required:
(a.) What is the equation for administrative costs using the high-low method?
(b.) Prepare an estimate of administrative costs for a month when 30,000 units are produced.
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101. Hawley Corp. wants to develop a cost equation for its administrative costs. The controller
believes the appropriate cost driver is units produced. Last year’s data are presented below:
Required:
(a.) What is the equation for administrative costs using the regression analysis?
(b.) Does the variable “units produced” have statistical significance? Explain.
(c.) Prepare an estimate of administrative costs for a month when 30,000 units are produced.
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102. The following manufacturing costs were incurred by the BGH Company in 2011:
These costs were incurred to produce 50,000 units of product. Variable manufacturing overhead
was 70% of the direct materials cost.
In 2012, the direct material and variable overhead costs per unit will increase by 12%, but the
direct labor costs per unit are not expected to change. Fixed manufacturing costs are expected to
increase by 8%.
Required:
(a.) Prepare a cost estimate for an activity level of 40,000 units of product in 2012.
(b.) Determine the total product costs per unit for 2011 and 2012.