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Solutions Manual, Appendix 5A 91
Exercise 5A-5 (20 minutes)
1. and 2.
The scattergraph plot and regression estimates of fixed and variable
costs using Microsoft Excel are shown below:
Note that the R
2
is approximately 0.94, which means that 94% of the
The regression equation, in the form
Y
=
a
+
bX,
is as follows (where
a
3. Total expected etching cost if 5 units are processed:
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92 Managerial Accounting, 16th Edition
Problem 5A-6 (30 minutes)
1. The scattergraph plot and regression estimates of fixed and variable
The cost formula, in the form
Y
=
a
+
bX
, using tons mined as the
activity base is $28,352 per quarter plus $2.58 per ton mined, or
© The McGraw-Hill Companies, Inc., 2018. All rights reserved.
Solutions Manual, Appendix 5A 93
Problem 5A-6 (continued)
2. The scattergraph plot and regression estimates of fixed and variable
The cost formula, in the form
Y
=
a
+
bX
, using direct labor-hours as
the activity base is $17,000 per quarter plus $9.00 per direct labor-hour,
or:
3. The company should probably use direct labor-hours as the activity
base, since the fit of the regression line to the data is much tighter than
it is with tons mined. The R
2
for the regression using direct labor-hours
© The McGraw-Hill Companies, Inc., 2018. All rights reserved.
94 Managerial Accounting, 16th Edition
Problem 5A-7 (45 minutes)
1. Cost of
g
oods sold ………………
V
ariable
A
dvertisin
g
expense ……………. Fixed
Shippin
g
expense ……………….. Mixed
2. Analysis of the mixed expenses:
Units
Shipping
Expense
Salaries and
Commissions
Expense
Hi
g
h level of activity …… 5,000 $38,000 $90,000
Fixed cost element:
Shipping
Expense
Salaries and
Commissions
Expense
Cost at hi
g
h level of activity … $38,000 $90,000
Less variable cost element:
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Solutions Manual, Appendix 5A 95
Problem 5A-7 (continued)
The cost formulas are:
Shipping expense:
$18,000 per month plus $4 per unit
or
3.
Morrisey & Brown, Ltd.
Income Statement
For the Month Ended September 30
Sales (5,000 units × $100 per unit)……….. $500,000
V
ariable expenses:
g
Cost of
g
oods sold
Fixed expenses:
A
dvertisin
g
expense ………………………… 21,000
Shippin
g
expense ……………………………. 18,000
Salaries and commissions expense………. 30,000
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96 Managerial Accounting, 16th Edition
Problem 5A-8 (20 minutes)
1. Maintenance cost at the 90,000 machine-hour level of activity can be
isolated as follows:
Level of Activity
60,000 MHs 90,000 MHs
T
otal factory overhead cost…….. $174,000 $246,000
Deduct:
2. High-low analysis of maintenance cost:
Machine-
Hours
Maintenance
Cost
Hi
g
h activity level ……………….. 90,000 $153,000
Low activity level ……………….. 60,000 105,000
Variable rate:
Change in cost $48,000
= = $1.60 per MH
Total fixed cost:
T
otal maintenance cost at the hi
g
h activity level .. $153,000
Less variable cost element
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Solutions Manual, Appendix 5A 97
Problem 5A-8 (continued)
3.
Variable Cost per
Machine-Hour Fixed Cost
Utilities cost ………………. $0.80
Supervisory salaries cost . $21,000
4. Total overhead cost at an activity level of 75,000 machine-hours:
Fixed costs ………………………………….…….. $ 30,000
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98 Managerial Accounting, 16th Edition
Problem 5A-9 (30 minutes)
1. High-low method:
Units
Sold
Shipping
Expense
Change in cost
Variable cost per unit = Change in activity
Fixed cost element:
T
otal shippin
g
expense at hi
g
h activity
level ……………………………………………. $210,000
Less variable element: