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 1 $ 2,695 2 3 4 5 6 7 8 9 10 11 12 2,740 2,790 2,890 2,925 3,025 2,935 Maintenance cost 2,975 2,850 2,640 2,660 2,960 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 (unit variable cost)" rounded to 4 decimal places and all other calculations, to nearest whole dollar.)

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 1 $ 2,695 2 3 4 5 6 7 8 9 10 11 12 2,740 2,790 2,890 2,925 3,025 2,935 Maintenance cost 2,975 2,850 2,640 2,660 2,960 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 (unit variable cost)" rounded to 4 decimal places and all other calculations, to nearest whole dollar.)

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter7: Linear Regression

Section: Chapter Questions

Problem 3P: Jensen Tire Auto is deciding whether to purchase a maintenance contract for its new computer wheel...

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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 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…
Albedo Incorporated manufactures high-end replacement telescope lenses for amateur and professional astronomers who are seeking to upgrade the performance of their telescopes. You have just become employed as a staff accountant at Albedo, and Jordan Coleman, the controller, has asked you to help with maintenance cost estimation for the lens manufacturing process. You review the manufacturing process and decide that the best cost driver for maintenance costs is machine hours. The data below are from the previous fiscal year for maintenance costs and machine hours: Month Maintenance Costs Machine Hours $ 3,210 4,650 5,175 3,350 3,100 1 2 3 4 5 6 7 8 9 10 11 12 2,950 2,900 2,900 4,120 4,350 3,500 3,775 2,750 3,900 4,050 2,690 2,500 2,580 2,300 2,500 3,160 3,325 2,780 3,000 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.)
At the beginning of last year (2021), Richter installed a semi-auto machine for its production. The owner of the company, Ron Richter, recently returned from an industry equipment exhibition where he watched a computerized machine. He was impressed with the production efficiency, and less labour intensive. Upon returning from the exhibition, he asked his purchasing agent to collect price and operating cost data on the new model. In addition, he asked the company's accountant to provide him with cost data on the company's old model. This information is presented here. Purchase price Accumulated Depreciation Estimated useful life from now Depreciation method Annual operating costs other than depreciation: Variable Fixed Old $105,500 50,000 5 years Straight-line $35,000 25,000 New $255,000 0 5 years Straight-line $15,000 10,000 If the old elevator is replaced now, at the beginning of 2022, Richter Condos will be able to sell it for $35,000. What Richter should do and provide your…
Johnson Filtration. Inc., provides maintenance service for water filtration systems throughout southern Florida. Customers contact Johnson with requests for maintenance service on their water filtration systems. To estimate the service time and the service cost. Johnson’s managers want to predict the repair time necessary for each maintenance request. Hence, repair time in hours is the dependent variable. Repair time is believed to be related to three factors: the number of months since the last maintenance service, the type of repair problem (mechanical or electrical), and the repairperson who performs the repair (Donna Newton or Bob Jones). Data for a sample of 10 service calls are reported in the following table: Develop the simple linear regression equation to predict repair time given the number of months since the last maintenance service, and use the results to test the hypothesis that no relationship exists between repair time and the number of months since the last maintenance service at the 0.05 level of significance. What is the interpretation of this relationship? What does the coefficient of determination tell you about this model? Using the simple linear regression model developed in part (a), calculate the predicted repair time and residual for each of the 10 repairs in the data. Sort the data in ascending order by value of the residual. Do you see any pattern in the residuals for the two types of repair? Do you see any pattern in the residuals for the two repairpersons? Do these results suggest any potential modifications to your simple linear regression model? Now create a scatter chart with months since last service on the x-axis and repair time in hours on the y-axis for which the points representing electrical and mechanical repairs are shown in different shapes and/or colors. Create a similar scatter chart of months since last service and repair time in hours for which the points representing repairs by Bob Jones and Donna Newton are shown in different shapes and/or colors. Do these charts and the results of your residual analysis suggest the same potential modifications to your simple linear regression model? Create a new dummy variable that is equal to zero if the type of repair is mechanical and one if the type of repair is electrical. Develop the multiple regression equation to predict repair time, given the number of months since the last maintenance service and the type of repair. What are the interpretations of the estimated regression parameters? What does the coefficient of determination tell you about this model? Create a new dummy variable that is equal to zero if the repairperson is Bob Jones and one if the repairperson is Donna Newton. Develop the multiple regression equation to predict repair time, given the number of months since the last maintenance service and the repairperson. What are the interpretations of the estimated regression parameters? What does the coefficient of determination tell you about this model? Develop the multiple regression equation to predict repair time, given the number of months since the last maintenance service, the type of repair, and the repairperson. What are the interpretations of the estimated regression parameters? What does the coefficient of determination tell you about this model? Which of these models would you use? Why?
Hicks Contracting collects and analyzes cost data in order to track the cost of installing decks on new home construction jobs. The following are some of the costs that they incur. Classify these costs as fixed or variable costs and as product or period costs. Lumber used to construct decks ($12.00 per square foot) Carpenter labor used to construct decks ($10 per hour) Construction supervisor salary ($45,000 per year) Depreciation on tools and equipment ($6,000 per year) Selling and administrative expenses ($35,000 per year) Rent on corporate office space ($34,000 per year) Nails, glue, and other materials required to construct deck (varies per job)
Danielle Hastings was recently hired as a cost analyst by CareNet Medical Supplies Inc. One of Danielle's first assignments was to perform a net present value analysis for a new warehouse. Danielle performed the analysis and calculated a present value index of 0.75. The plant manager, Jerrod Moore, is intent on purchasing the warehouse because he believes that more storage space is needed. Jerrod asks Danielle to come to his office, where the following conversation takes place: Jerrod: Danielle, you're new here, aren't you? Danielle: Yes, I am. Jerrod: Well, Danielle, I'm not at all pleased with the capital investment analysis that you performed on this new warehouse. I need that warehouse for my production. If I don't get it, where am I going to place our output? Danielle: Well, we need to get product into our customers' hands. Jerrod: I agree, and we need a warehouse to do that. Danielle: My analysis does not support constructing a new warehouse. The numbers…
Nation’s Capital Fitness, Inc. operates a chain of fitness centers in the Washington, D.C., area. The firm’s controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firm’s equipment maintenance costs must be determined. The accounting staff has suggested the use of an equation, in the form of Y = a + bX, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows: (image below) Required:1. Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred by Nation’s Capital Fitness, Inc. Express the cost behavior pattern in equation form.2. Using your answer to requirement (1), what is the variable component of the maintenance cost?3. Compute the predicted maintenance cost at 590 hours of activity.4. Compute the variable cost per hour and the fixed cost per hour at 600 hours of activity. Explain why the fixed cost per hour could be…
Nation's Capital Fitness, Incorporated, operates a chain of fitness centers in the Washington, D.C., area. The firm's controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of an equation, in the form of Y= a + bx, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows: Month January February March April May June July August September October November December Total Average Hours of Maintenance Service 560 480 280 470 350 460 320 430 490 380 350 340 4,910 409 Maintenance cost Maintenance Costs $ 5,110 4,240 2,730 4,300 3,030 4, 120 3,000 3,590 4,000 3,220 3,170 3,070 $ 43,580 $ 3,632 PR 6-38 (Algo) Part 3 Compute the predicted maintenance cost... 3. Compute the predicted maintenance cost at 670 hours of activity. Answer is complete but not entirely correct. $ 49,192 X
Nation's Capital Fitness, Incorporated, operates a chain of fitness centers in the Washington, D.C., area. The firm's controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of an equation, in the form of Y= a + bX, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows: Month January February March April May June July August September October November December Total Average Hours of Maintenance Service Variable maintenance cost 560 480 280 470 350 460 320 430 490 380 350 340 4,910 409 $ Maintenance Costs $ 5,110 4,240 2,730 4,300 3,030 4, 120 PR 6-38 (Algo) Part 2 What is the variable component of the maintenance cost? 2. Using your answer to requirement 1, what is the variable component of the maintenance cost? Note: Round your answer to 2 decimal places. 3,000 3,590…
Nation's Capital Fitness, Incorporated, operates a chain of fitness centers in the Washington, D.C., area. The firm's controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of an equation, in the form of Y= a + bX, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows: Month January February March April May June July August September October November December Total Average Hours of Maintenance Service 560 480 280 470 350 Monthly maintenance cost = 460 320 430 490 380 350 340 4,910 409 Maintenance Costs $ 5,110 4,240 2,730 4,300 3,030 4,120 3,000 3,590 4,000 3,220 3,170 3,070 $ 43,580 $ 3,632 PR 6-38 (Algo) Part 1 Estimate the behavior of the maintenance costs incurred... Required: 1. Using the high-low method of cost estimation, estimate the behavior of the maintenance…
Nation's Capital Fitness, Incorporated, operates a chain of fitness centers in the Washington, D.C., area. The firm's controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of an equation, in the form of Y = a + bX, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows: Month January February March April May June July August September October November December Total Average Hours of Maintenance Service Variable maintenance cost 520 470 250 490 340 470 330 410 480 380 390 340 4,870 406 Maintenance Costs $ 5,305 4,170 2,740 4,280 3,050 4,160 3,040 3,570 3,990 3,230 3,170 3,120 $ 43,825 $ 3,652 2. Using your answer to requirement 1, what is the variable component of the maintenance cost? Note: Round your answer to 2 decimal places. ********* per hour