WK 6 Homework Assignment - COST ACCOUNTING

Week 6 Homework

Please complete the below problems and submit your answers in the Week 6 Dropbox. See "Syllabus/Due Dates for Assignments & Exams" for due date information.

1. Jersey Subs, Inc. wants to find an equation to estimate monthly utility costs. Jersey Subs has been in business for one year and has collected the following cost data for utilities:

a. Which of the preceding costs is variable? Fixed? Mixed? Explain.

b. Using the high-low method, determine the cost function for each cost.

c. Combine the preceding information to get a monthly utility cost function for Jersey.

d. Next month, Jersey Subs expects to use 2,200 kilowatt hours of electricity, make 1,500 minutes of telephone calls, and use 32,000 gallons of water. Estimate total cost of utilities for the month.

2. Bolder Bikes, Inc. manufactures mountain bike frames in Boulder, Colorado. In 2012, they produced 24,000 frames at a total cost of $1,296,000. Frames Unlimited, Inc. has offered to supply as many frames as Boulder Bikes wants at a cost of $49.50. Boulder Bikes anticipates needing 26,000 frames each year over the next few years. Boulder Bikes uses historical cost data to come up with the following regression equation with total manufacturing costs of the frame as the dependent variable and frames produced as the independent variable:

y=$545,000 + 21X

During the years used to estimate the regression equation, the production of frames varied from 22,000 to 26,000.

a. Using this equation, estimate how much it would cost Boulder Bikes to manufacture the 26,000 frames.

b. How much more or less costly is it to manufacture the frames rather than to acquire them from Frames Unlimited?

Electricity

Kilowatt

Telephone

Minutes

Water

Water

Month

Bill

Hours Used

Bill

Used

Bill

Used

January

375

1,250

92.50

$

1,200

75.00

$

32,560

February

438

1,458

91.70

$

1,156

75.00

$

28,554

March

572

1,906

95.32

$

1,353

75.00

$

33,508

April

422

1,406

90.09

$

1,069

75.00

$

31,926

May

613

2,042

98.53

$

1,527

75.00

$

32,569

June

650

2,167

99.34

$

1,571

75.00

$

27,211

July

544

1,813

93.91

$

1,276

75.00

$

34,829

August

622

2,073

96.72

$

1,429

75.00

$

33,265

September

656

2,188

96.12

$

1,396

75.00

$

35,735

October

641

2,135

94.31

$

1,298

75.00

$

34,062

November

619

2,063

91.49

$

1,145

75.00

$

30,472

December

659

2,198

97.53

$

1,473

75.00

$

36,332