San Diego State University Operations And Supply Chain Management Assignment Help - Corporation

Question - Exercise 5-24 Methods of Estimating Costs: Account Analysis (L.O. 3)
A consulting firm's accounting records show the following costs for year 1:

Direct materials (supplies) $ 360,000
Direct labor 2,580,000
Total overhead 1,140,000

Production was 150,000 billable hours. Fixed overhead was $600,000.

For year 2, direct materials costs are expected to increase by 10 percent per unit. Direct labor costs
are expected to increase by 15 percent. Variable overhead per billable hour is expected to remain the
same, but fixed overhead is expected to increase by 5 percent.

Required:
(a)
Year 2 production is expected to be 195,000 billable hours. What are the estimated direct
materials, direct labor, variable overhead, and fixed ...Read More overhead costs for year 2? (Do not round
intermediate calculations. Omit the "$" sign in your response.)

Cost item This year's cost
Direct materials (supplies) $
Direct labor
Variable overhead
Fixed overhead

Total costs $




(b) Determine the total costs per billable hour for year 1 and year 2. (Round your answers to 2
decimal places. Omit the "$" sign in your response.)

Costs per
billable hour
Last year $

This year $



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Exercise 5-26 Methods of Estimating Costs: High-Low (L.O. 4)
Adriana Corporation manufactures football equipment. In planning for next year, the managers want
to understand the relation between activity and overhead costs. Discussions with the plant supervisor
suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data
were collected from last year's operations:

Month Labor-Hours Machine-Hours Overhead Costs
1 3,625 6,775 $ 513,435
2 3,575 7,035 518,960
3 3,400 7,600 549,575
4 3,700 7,265 541,400
5 3,900 7,955 581,145
6 3,775 7,895 572,320
7 3,700 6,950 535,110
8 3,625 6,530 510,470
9 3,550 7,270 532,195
10 3,975 7,725 565,335
11 3,375 6,490 503,775
12 3,550 8,020 564,210

Required:
(a)
Use the high-low method to estimate the fixed and variable portions of overhead costs based on
machine-hours. (Round your variable cost answer to 2 decimal places. Omit the "$" sign in
your response.)

Variable cost (per machine hour) $
Fixed cost $
(b) Managers expect the plant to operate at a monthly average of 7,500 machine-hours next year.

What are the estimated monthly overhead costs, assuming no inflation? (Use rounded variable
cost. Omit the "$" sign in your response.)

Overhead costs $



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Exercise 5-30 Methods of Estimating Costs: Simple Regression (L.0. 5)
Adriana Corporation manufactures football equipment. In planning for next year, the managers want
to understand the relation between activity and overhead costs. Discussions with the plant supervisor
suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data
were collected from last year's operations:

Month Labor-Hours Machine-Hours Overhead Costs
1 3,625 6,775 $513,435
2 3,575 7,035 518,960
3 3,400 7,600 549,575
4 3,700 7,265 541,400
5 3,900 7,955 581,145
6 3,775 7,895 572,320
7 3,700 6,950 535,110
8 3,625 6,530 510,470
9 3,550 7,270 532,195
10 3,975 7,725 565,335
11 3,375 6,490 503,775
12 3,550 8,020 564,210


Simple regression results from the data of Adriana Corporation are as follows:
Equation:
Overhead = $217,610 + ($88.61 AfA?" Labor-hours)
Statistical data

Correlation coefficient .610
R2 .372


Required:
Estimate overhead if the company expects the plant to operate at a monthly average of 3,000 labor-
hours next year. (Omit the "$" sign in your response.)
Overhead $



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Exercise 5-31 Methods of Estimating Costs: Multiple Regression (L.O. 5)
Adriana Corporation manufactures football equipment. In planning for next year, the managers want
to understand the relation between activity and overhead costs. Discussions with the plant supervisor
suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data
were collected from last year's operations:

Month Labor-Hours Machine-Hours Overhead Costs
1 3,625 6,775 $513,435
2 3,575 7,035 518,960
3 3,400 7,600 549,575
4 3,700 7,265 541,400
5 3,900 7,955 581,145
6 3,775 7,895 572,320
7 3,700 6,950 535,110
8 3,625 6,530 510,470
9 3,550 7,270 532,195
10 3,975 7,725 565,335
11 3,375 6,490 503,775
12 3,550 8,020 564,210

Multiple regression results from the data of Adriana Corporation are as follows:
Equation:
Overhead = $124,570 + ($31.93 AfA?" Labor-hours) + ($41.10 AfA?" Machine-hours)
Statistical data
Correlation coefficient .982
R2 .964


Required:
Estimate overhead using the multiple regression results, assuming that the company expects the
plant to operate at a monthly average of 9,000 machine-hours and 3,000 labor-hours next year. (Omit
the "$" sign in your response.)
Overhead $


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Problem 5-43 Interpretation of Regression Results: Simple Regression Using a Spreadsheet (L.O. 4,
5, 8)
Hartman Company's Lucas plant manufactures thermostatic controls. Plant management has
experienced fluctuating monthly overhead costs and wants to estimate overhead costs accurately to
plan its operations and its financial needs. Interviews with plant personnel and studies reported in
trade publications suggest that overhead in this industry tends to vary with labor-hours.
A member of the controller's staff proposed that the behavior pattern of these overhead costs be
determined to improve cost estimation. Another staff member suggested that a good starting place for
determining cost behavior patterns is to analyze historical data. Following this suggestion, monthly
data were gathered on labor-hours and overhead costs for the past two years. No major changes in
operations occurred over this period of time. The data are shown in the following table:

Month Labor-Hours Overhead Costs
1 251,563 $ 2,741,204
2 238,438 2,166,231
3 192,500 1,902,236
4 271,250 2,590,765

5 323,750 3,071,812
6 290,938 2,618,161
7 271,250 2,480,231
8 251,563 2,745,558
9 231,875 2,211,799
10 343,438 3,437,704
11 185,938 2,314,436
12 231,875 2,550,630
13 382,813 3,603,709
14 376,250 3,404,786
15 290,938 3,016,493
16 395,938 3,638,331
17 356,563 3,553,886
18 323,750 3,191,617
19 389,375 3,481,714
20 317,188 3,219,519
21 343,438 3,495,424
22 336,875 3,207,258
23 382,813 3,600,622
24 376,250 3,736,658

Required:
(a)
Use the high-low estimation method to estimate the overhead cost behavior (fixed and variable
portions components of cost) for the Lucas plant. (Round your fixed cost to the nearest dollar
amount and the variable cost to 5 decimal places. To calculate the fixed costs, use highest
activity level. Omit the "$" sign in your response.)

Overhead costs = $ + ($ per LH AfA?" Labor hours)
(c) Use a spreadsheet program to compute regression coefficients to describe the overhead cost
equation.(Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Coefficients
Intercept (Fixed costs) $
Labor Hours $

(d)
Use the results of your regression analysis to develop an estimate of overhead costs assuming
350,000 labor-hours will be worked next month. (Round your Labor Hours to 2 decimal places
for intermediate calculation. Round your final answer to the nearest dollar amount. Omit
the "$" sign in your response.)

Overhead cost $



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