Handout Exercises on Cost Functions Managerial Accounting Concepts Determining Cost Behavior and Estimating a Cost Function Monthly costs for the production department of the Hill Company for two levels of production are as follows: Cost Item 2.000 Units 4.000 Units Direct Materials $20,000 $40,000 Production Supervisory Salary 8,000 8,000 Maintenance 7,000 11,000 Required: Indicate which costs are variable, fixed, and mixed and give the reason for each answer. Required: Develop the appropriate cost function for the Hill Company to use in predicting its production department costs for next month if it plans to make 2,800 units. Required: Determine if the cost function was a good predictor of production department costs if the actual costs for the month were $44,000 and the company made 3,300 units. The company has set an acceptable tolerance rate of plus or minus 5% for actual costs from budgeted costs