Required: 1. What is the cost equation for maintenance costs using the high-low method? (Round "slope (unit variable cost)" to 2 decimal places. Negative amounts should be indicated by a minus sign.)
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- Horton Manufacturing Incorporated produces blinds and other window treatments for residential homes and offices. The owner is concerned about the maintenance costs for the production machinery because maintenance costs for the previous fiscal year were higher than he expected. The owner has asked you to assist in estimating future maintenance costs to better predict the firm's profitability. Together, you have determined that the best cost driver for maintenance costs is machine hours. The data from the previous fiscal year for maintenance costs and machine hours follow: Month Maintenance Costs Machine Hours $ 2,665 2,710 2,760 1 2 3 4 6 7 8 9 10 11 12 2,860 2,895 Maintenance cost 3,045 2,905 2,945 2,820 2,610 2,630 2,930 1,566 1,670 1,685 1,735 1,855 1,890 1,865 1,885 1,775 1,450 1,630 1,465 Required: 1. Use the high-low method to estimate the fixed and variable portions for maintenance costs. (In your calculations, round "slope (unit variable cost)" to 4 decimal places. Enter the…Horton Manufacturing Incorporated produces blinds and other window treatments for residential homes and offices. The owner is concerned about the maintenance costs for the production machinery because maintenance costs for the previous fiscal year were higher than he expected. The owner has asked you to assist in estimating future maintenance costs to better predict the firm's profitability. Together, you have determined that the best cost driver for maintenance costs is machine hours. The data from the previous fiscal year for maintenance costs and machine hours follow: Month Maintenance Costs Machine Hours $ 2,695 2,740 2,790 2,890 2,925 3,025 2,935 1 2 3 4 56789012 10 11 2,975 2,850 2,640 2,660 2,960 Maintenance cost 1,620 1,730 1,745 1,795 1,790 1,890 1,810 1,845 1,835 1,480 1,690 1,495 Required: 1. Use the high-low method to estimate the fixed and variable portions for maintenance costs. (In your calculations, round "slope (uni variable cost)" to 4 decimal places. Enter the "slope…Horton Manufacturing Incorporated produces blinds and other window treatments for residential homes and offices. The owner is concerned about the maintenance costs for the production machinery because maintenance costs for the previous fiscal year were higher than he expected. The owner has asked you to assist in estimating future maintenance costs to better predict the firm's profitability. Together, you have determined that the best cost driver for maintenance costs is machine hours. The data from the previous fiscal year for maintenance costs and machine hours follow: Month 1 3 4 6 7 8 9 10 11 12 Maintenance Costs Machine Hours $ 2,665 2,710 2,760 2,860 2,895 3,045 2,905 2,945 2,820 2,610 2,630 2,930 Maintenance cost 1,566 1,670 1,685 1,735 1,855 1,890 1,865 1,885 1,775 1,450 1,630 1,465 Required: 1. Use the high-low method to estimate the fixed and variable portions for maintenance costs. (In your calculations, round "slope (unit variable cost)" to 4 decimal places. Enter the…
- You are the accountant for the Best Outdoor Living company which manufactures various outdoor furniture. The furniture is sold by specialty stores and through internet outlets. You are responsible for reviewing costs and creating standards costs based on the information you have reviewed. One of your former colleagues has recently started a company to collect and sell data on industry benchmarks. You are offered the chance to receive benchmarks from other outdoor furniture companies for free if you will provide the standard and actual costs for the last three years of your company. As creation of the standards is a tedious process, you feel this data would be helpful in your job. Review the IMA’s ethical guidelines, under Reading Preparation and identify the conflict with the guidelines. What are the relevant factors in this situation and how you should handle this, and what you would recommend to the ControllerJensen Tire Auto is deciding whether to purchase a maintenance contract for its new computer wheel alignment and balancing machine. Managers feel that maintenance expense should be related to usage, and they collected the following information on weekly usage (hours) and annual maintenance expense (in hundreds of dollars). a. Develop a scatter chart with weekly usage hours as the independent variable. What does the scatter chart indicate about the relationship between weekly usage and annual maintenance expense? b. Use the data to develop an estimated regression equation that could be used to predict the annual maintenance expense for a given number of hours of weekly usage. What is the estimated regression model? c. Test whether each of the regression parameters 0 and 1 is equal to zero at a 0.05 level of significance. What are the correct interpretations of the estimated regression parameters? Are these interpretations reasonable? d. How much of the variation in the sample values of annual maintenance expense does the model you estimated in part (b) explain? e. If the maintenance contract costs 3,000 per year, would you recommend purchasing it? Why or why not?Emery Manufacturing Company produces component parts for the farm equipment industry and has recently undergone a major computer system conversion. Jake Murray, the controller, has established a troubleshooting team to alleviate accounting problems that have occurred since the conversion. Jake has chosen Gus Swanson, assistant controller, to head the team that will include Linda Wheeler, cost accountant; Cindy Madsen, financial analyst; Randy Lewis, general accounting supervisor; and Max Crandall, financial accountant. The team has been meeting weekly for the last month. Gus insists on being part of all the team conversations in order to gather information, to make the final decision on any ideas or actions that the team develops, and to prepare a weekly report for Jake. He has also used this team as a forum to discuss issues and disputes about him and other members of Emerys top management team. At last weeks meeting, Gus told the team that he thought a competitor might purchase the common stock of Emery, because he had overheard Jake talking about this on the telephone. As a result, most of Emerys employees now informally discuss the sale of Emerys common stock and how it will affect their jobs. Required: Is Gus Swansons discussion with the team about the prospective sale of Emery unethical? Discuss, citing specific standards from the code of ethical conduct to support your position. (CMA adapted)
- Mantenga Company provides routine maintenance services for heavy moving and transportation vehicles. Although the vehicles vary, the maintenance services provided follow a fairly standard pattern. Recently, a potential customer has approached the company, requesting a new maintenance service for a radically different type of vehicle. New servicing equipment and some new labor skills will be needed to provide the maintenance service. The customer is placing an initial order to service 150 vehicles and has indicated that if the service is satisfactory, several additional orders of the same size will be placed every 3 months over the next 3 to 5 years. Mantenga uses a standard costing system and wants to develop a set of standards for the new vehicle. The usage standards for direct materials such as oil, lubricants, and transmission fluids were easily established. The usage standard is 25 quarts per servicing, with a standard cost of 4 per quart. Management has also decided on standard rates for labor and overhead. The standard labor rate is 15 per direct labor hour, the standard variable overhead rate is 8 per direct labor hour, and the standard fixed overhead rate is 12 per direct labor hour. The only remaining decision is the standard for labor usage. To assist in developing this standard, the engineering department has estimated the following relationship between units serviced and average direct labor hours used: As the workers learn more about servicing the new vehicles, they become more efficient, and the average time needed to service one unit declines. Engineering estimates that all of the learning effects will be achieved by the time that 320 units are produced. No further improvement will be realized past this level. Required: 1. Assume that the average labor time is 0.768 hour per unit after the learning effects are achieved. Using this information, prepare a standard cost sheet that details the standard service cost per unit. (Note: Round costs to two decimal places.) 2. CONCEPTUAL CONNECTION Given the per-unit labor standard set, would you expect a favorable or an unfavorable labor efficiency? Explain. Calculate the labor efficiency variance for servicing the first 320 units. 3. CONCEPTUAL CONNECTION Assuming no further improvement in labor time per unit is possible past 320 units, explain why the cumulative average time per unit at 640 units is lower than the time at 320 units. Show that the standard labor time should be 0.768 hour per unit. Explain why this value is a good choice for the per-unit labor standard.Assume you are the leather department manager at the Famous Football Factory. The leather department is a cost center and you are reviewing the scrap costs for the previous year, shown here: A. Using Microsoft Excel or another spreadsheet application, create a line chart with markers showing the leather scrap expense. Describe your observations. B. Knowing that leather is susceptible to indoor temperature, you decide to talk with the maintenance manager and obtain the following information: Using Microsoft Excel or another spreadsheet application, create individual line charts with markers showing the indoor temperature, spare parts inventory, and breakdowns. Describe your observations and actions you might consider.Jasmine Gonazles, Administrative Director of Small Imaging Center, has been asked by the practice members to see if it is feasible to add more staff to support the practice's mammography service, which currently has (2) analogue film or screen units and (2) technologists. She has compiled the following information to help make the decision: Reimbursement per mammography $75 Equipment costs per month $1600 Technologist cost per mammography $20 Technologist aide cost per mammography $4 Variable cost per mammography $10 Monthly maintenance per machine $700 What is the monthly patient volume needed per month to cover fixed and variable costs? What is the monthly patient volume needed per month if Small Imaging Center desires to cover its fixed and variable costs and make a $5,000 profit on this equipment to cover other costs associated with the organization? If reimbursement decreases to $55 per screen, what is the monthly patient…
- Jasmine Gonazles, Administrative Director of Small Imaging Center, has been asked by the practice members to see if it is feasible to add more staff to support the practice's mammography service, which currently has (2) analogue film or screen units and (2) technologists. She has compiled the following information to help make the decision: Reimbursement per mammography $75 Equipment costs per month $1600 Technologist cost per mammography $20 Technologist aide cost per mammography $4 Variable cost per mammography $10 Monthly maintenance per machine $700 If a new technologist aide is hired in addition to the two technologists, what is the monthly patient volume needed at the original reimbursement rate to cover variable costs, but not profit?When a company has post-acquisition expenditures related to Property, Plant, and Equipment it must determine whether the amount should be expensed as an ordinary repair or capitalized as a major repair, addition, or betterment. This requires considering the nature of the expenditure and the use of judgment. Many companies use a threshold amount. Any expenditure below the threshold is expensed. Items over the threshold are examined and a decision is made about whether to expense or capitalize the item. This approach is justified by both materiality and considering costs and benefits. For example, a company with $94 million in net property, plant, and equipment and $250 million of operating expenses would not consider a $100 repair as material. Plus, if the company had to spend thousands of dollars examining every repair expenditure, the costs of doing the analysis could easily outweigh the benefits. SouthEast Equipment has a large number of machines and equipment that are available for…PERBANAS, Inc. installs heating systems in new homes built in the southern tier counties of New York state. Jobs are priced using the time and materials method. The president of PERBANAS, Fenturini, is pricing a job involving the heating systems for six houses to be built by a local developer. He has made the following estimates. Material cost $ 30,000 Labor hours 200 The following predictions pertain to the company’s operations for the next year. Labor rate, including fringe benefits $ 8.00 per hour Annual labor hours 6,000 hours Annual overhead costs: Material handling and storage $ 12,500 Other overhead costs $ 54,000 Annual cost of materials used $ 125,000 Perbanas adds a markup of $ 2 per hour on its time charges, but there is no markup on material costs. Required: 1. Calculate the company's time charges and the material charges percentage. 2. Compute the price for the job 3. What would be the price of the job if Perbanas also added a markup of 5 % on all material charges…