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30. The following costs were for Optimal View Inc., a contact lens manufacturer:
Output Fixed Cost Variable Cost Total Costs
300 $5,200 $12,000 $17,200
350 5,200 14,000 19,200
400 5,200 16.000 21,200
450 5,200 18,000 23,200
At an output level of 425 lenses, per unit variable cost is calculated to be:
31. The following costs were for Optimal View Inc., a contact lens manufacturer:
Output Fixed Cost Variable Cost Total Costs
300 $5,200 $12,000 $17,200
350 5,200 14,000 19,200
400 5,200 16.000 21,200
450 5,200 18,000 23,200
At an output level of 500 lenses, per unit total cost is projected to be:
32. Midgett Co. has accumulated data to use in preparing its annual profit plan for the
upcoming year. The cost behavior pattern of the maintenance costs must be determined. The
accounting staff suggested that linear regression be employed to derive an equation for
maintenance hours and costs. Data regarding the maintenance hours and costs for the last year
and the results of the regression analysis are as follows:
Month Maintenance Cost Machine Hours
Jan. $5,040 620
Feb. 3,648 420
Mar. 4,320 520
Apr. 3,331 390
May 5,221 650
June 3,550 400
July 3,655 430
Aug. 5,365 690
Sept. 5,110 640
Oct. 4,866 610
Nov. 3,944 460
Dec. 3,790 440
Sum $51,840 6,270
Average $4,320.00 522.50
Average cost per hour ($51,840 ÷ 6,270) = $8.27 (rounded to the nearest cent)
r = .99821
r2 = .99780
Using the high-low method, unit variable cost is calculated to be (round to the nearest cent):
33. Midgett Co. has accumulated data to use in preparing its annual profit plan for the
upcoming year. The cost behavior pattern of the maintenance costs must be determined. The
accounting staff suggested that linear regression be employed to derive an equation for
maintenance hours and costs. Data regarding the maintenance hours and costs for the last year
and the results of the regression analysis are as follows:
Month Maintenance Cost Machine Hours
Jan. $5,040 620
Feb. 3,648 420
Mar. 4,320 520
Apr. 3,331 390
May 5,221 650
June 3,550 400
July 3,655 430
Aug. 5,365 690
Sept. 5,110 640
Oct. 4,866 610
Nov. 3,944 460
Dec. 3,790 440
Sum $51,840 6,270
Average $4,320.00 522.50
Average cost per hour ($51,840 ÷ 6,270) = $8.27 (rounded to the nearest cent)
r = .99821
r2 = .99780
Using the high-low method, total monthly fixed cost is calculated to be (round to nearest dollar):
34. Midgett Co. has accumulated data to use in preparing its annual profit plan for the
upcoming year. The cost behavior pattern of the maintenance costs must be determined. The
accounting staff suggested that linear regression be employed to derive an equation for
maintenance hours and costs. Data regarding the maintenance hours and costs for the last year
and the results of the regression analysis are as follows:
Month Maintenance Cost Machine Hours
Jan. $5,040 620
Feb. 3,648 420
Mar. 4,320 520
Apr. 3,331 390
May 5,221 650
June 3,550 400
July 3,655 430
Aug. 5,365 690
Sept. 5,110 640
Oct. 4,866 610
Nov. 3,944 460
Dec. 3,790 440
Sum $51,840 6,270
Average $4,320.00 522.50
Average cost per hour ($51,840 ÷ 6,270) = $8.27 (rounded to the nearest cent)
r = .99821
r2 = .99780
Using the high-low method, total maintenance cost for 600 hours is calculated to be (round to
the nearest dollar):
35. Midgett Co. has accumulated data to use in preparing its annual profit plan for the
upcoming year. The cost behavior pattern of the maintenance costs must be determined. The
accounting staff suggested that linear regression be employed to derive an equation for
maintenance hours and costs. Data regarding the maintenance hours and costs for the last year
and the results of the regression analysis are as follows:
Month Maintenance Cost Machine Hours
Jan. $5,040 620
Feb. 3,648 420
Mar. 4,320 520
Apr. 3,331 390
May 5,221 650
June 3,550 400
July 3,655 430
Aug. 5,365 690
Sept. 5,110 640
Oct. 4,866 610
Nov. 3,944 460
Dec. 3,790 440
Sum $51,840 6,270
Average $4,320.00 522.50
Average cost per hour ($51,840 ÷ 6,270) = $8.27 (rounded to the nearest cent)
r = .99821
r2 = .99780
The percent of the total variance that can be explained by the regression equation is:
36. Marshall Co. produced a pilot run of fifty units of a recently developed piston used in one
of its products. Marshall expected to produce and sell 1,950 units annually. The pilot run required
an average of .55 direct labor hours per piston for 50 pistons. Marshall experienced an eighty
percent learning curve on the direct labor hours needed to produce new pistons. Past experience
indicated that learning tends to cease by the time 800 pistons are produced.
Marshall's manufacturing costs for pistons are presented below.
Direct labor $14.00 per direct labor hour
Variable overhead 12.00 per direct labor hour
Fixed overhead 20.00 per direct labor hour
Materials 5.00 per unit
Marshall received a quote of $9 per unit from Kytel Machine Co. for the additional 1,900 needed
pistons. Marshall frequently subcontracts this type of work and has always been satisfied with
the quality of the units produced by Kytel.
If the pistons are manufactured by Marshall Co., the average direct labor hours per unit for the
first 800 pistons (including the pilot run) produced is calculated to be (use five decimal places in
calculating the average time):
37. Marshall Co. produced a pilot run of fifty units of a recently developed piston used in one
of its products. Marshall expected to produce and sell 1,950 units annually. The pilot run required
an average of.55 direct labor hours per piston for 50 pistons. Marshall experienced an eighty
percent learning curve on the direct labor hours needed to produce new pistons. Past experience
indicated that learning tends to cease by the time 800 pistons are produced.
Marshall's manufacturing costs for pistons are presented below.
Direct labor $14.00 per direct labor hour
Variable overhead 12.00 per direct labor hour
Fixed overhead 20.00 per direct labor hour
Materials 5.00 per unit
Marshall received a quote of $9 per unit from Kytel Machine Co. for the additional 1,900 needed
pistons. Marshall frequently subcontracts this type of work and has always been satisfied with
the quality of the units produced by Kytel.
If the pistons are manufactured by Marshall Co., the total direct labor hours for the first 800
pistons (including the pilot run) produced is calculated to be (round to two digits after the
decimal point):
38. Based on the maintenance expenses of a company, which are to be analyzed for
purposes of constructing a flexible budget. Examination of past records disclosed the following
costs and volume measures:
Highest Lowest
Cost per month $42,000 $34,000
Machine hours 46,000 30,000
Using the high-low method, the estimated variable cost per machine hour is:
39. Based on the maintenance expenses of a company, which are to be analyzed for
purposes of constructing a flexible budget. Examination of past records disclosed the following
costs and volume measures:
Highest Lowest
Cost per month $42,000 $34,000
Machine hours 46,000 30,000
Using the high-low technique, estimate the annual fixed cost for maintenance expenditures:
40. Based on the maintenance expenses of a company are to be analyzed for purposes of
constructing a flexible budget. Examination of past records disclosed the following costs and
volume measures:
Highest Lowest
Cost per month $86,000 $74,000
Machine hours 96,000 66,000
Using the high-low-point method of analysis, the estimated variable cost per machine hour is:
41. Based on the maintenance expenses of a company are to be analyzed for purposes of
constructing a flexible budget. Examination of past records disclosed the following costs and
volume measures:
Highest Lowest
Cost per month $86,000 $74,000
Machine hours 96,000 66,000
Using the high-low technique, estimate the annual fixed cost for maintenance expenditures:
42. Which of the following is not a correct pairing of estimated costs and its related cost
driver?
43. Which of the following is not a step in the typical cost estimation process?
44. Which of the following provides the most accurate cost estimation?
45. The high-low method:
46. Jackson, Inc. is preparing a budget for the coming year and requires a breakdown of the
cost of electrical power used in its factory into the fixed and variable elements. The following
data on the cost of power used and direct labor hours worked are available for the last six
months of this year:
Month Cost of Power Direct Labor Hours
July $15,850 3,000
August 13,400 2,050
September 16,370 2,900
October 19,800 3,650
November 17,600 2,670
December 18,500 2,650
Total $101,520 16,920
Assuming that Jackson uses the high-low method of analysis, the estimated variable cost of
steam per direct labor hour is:
