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Chapter 6 in Class Questions Handout 2

The document contains 6 questions from practice exams on cost estimation and regression analysis. Question 2 asks to use the high-low method to estimate maintenance costs for 4000 hours using past monthly data. Question 3 gives the results of a regression analysis predicting materials costs and asks for the linear cost function. Question 4 provides the results of two regression analyses and asks for the cost function and estimated cost given quantities of machine and labor hours. Question 5 similarly provides regression results and asks about the estimated cost function and measure of goodness of fit. Question 6 gives cost data for two quantities of croissants baked and asks for the total cost of baking 670 croissants.

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Camila Miranda Kanda
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114 views2 pages

Chapter 6 in Class Questions Handout 2

The document contains 6 questions from practice exams on cost estimation and regression analysis. Question 2 asks to use the high-low method to estimate maintenance costs for 4000 hours using past monthly data. Question 3 gives the results of a regression analysis predicting materials costs and asks for the linear cost function. Question 4 provides the results of two regression analyses and asks for the cost function and estimated cost given quantities of machine and labor hours. Question 5 similarly provides regression results and asks about the estimated cost function and measure of goodness of fit. Question 6 gives cost data for two quantities of croissants baked and asks for the total cost of baking 670 croissants.

Uploaded by

Camila Miranda Kanda
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CHAPTER 6 – QUESTIONS HANDOUT 2

Question 2
Using the High Low Method, Estimate the Future Maintenance Cost Using the
following past data.

MONTH HOURS COST


JAN 3551 $22943
FEB 3325 $22510
MAR 3614 $23030
APR 3423 $22113
MAY 3410 $22950
JUN 3500 $23476

The company estimates 4000 maintenance hours for July. What is the total
estimated cost for July?

Question 3
Acme Corporation used regression analysis to predict the annual cost of indirect
materials. The results were as follows:

Indirect Materials Cost Explained by Units Produced


Constant $5,150
Standard error of Y estimate $415
r2 0.6972
Number of observations 134

X coefficient(s) 13.92
Standard error of coefficient(s) 2.1533
What is the linear Cost Function?
Question 4 (From Practice Final Q7 and Q8)
Sally has suggested the company try regression as a method to estimate the cost function.
She uses the past data to obtain the following output from a simple regression analysis
using two variables. What is the cost function?
If the company used 10,000 machine hours and 7,000 labour hours, what is the estimated
cost?
Regression using labour hours
Constant $ 250,000
standard error of Constant 180,000
R-squared 0.823
Coefficient 6.5
Standard error of Coefficient 0.3
T-Value of X Coefficient 4.5
T-Value of Constant 0.85

Regression using machine hours


Constant $ 22,730
Standard error of Constant 532
R-squared 0.423
X Coefficient 7.9
Standard error of Coefficient 0.5
T-Value of X Coefficient 3.5
T-Value of Constant 3.85

Question 5: From Cost Estimation and Behaviour Practice Questions Q 7,8,9


ABC Corporation’s accountant, Sally, has suggested the company try regression as a
method to estimate the cost function. She uses the past data to obtain the following output
from a simple regression analysis:
Constant $ 271,819.66 Standard error of Y estimate 2,771.28
R-squared 0.989 Degrees of Freedom 4
X Coefficient 6.171 Standard error of Coefficient 0.320

From this regression, the estimated cost function is:


Y = 6.171 + 271,819.66 X
Y = 6.171 + 0.320 X
Y = 271,819.66 + 6.171 X
Y = 0.320 + 271,819.66 X

What is the goodness of fit in this analysis:


0.320
6.171
4
0.989

Question 6: From Cost Estimation and Behaviour Practice Questions Q 3


Nellibell's Café bakes croissants that are sold to local restaurants and grocery stores in the
Columbia, South Carolina area. When 600 croissants are baked, the average cost is $0.70. When
720 croissants are baked, the average cost is $0.65. What is the total cost when 670 croissants
are baked?

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