Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I'm having trouble answering this problem. Can you please help me? Problem 10-33 (page 415) Regression, activity-based costing, choosing cost drivers Parker Manufacturing has been

image text in transcribed

I'm having trouble answering this problem. Can you please help me?

image text in transcribed Problem 10-33 (page 415) Regression, activity-based costing, choosing cost drivers Parker Manufacturing has been using activity-based costing to determine the cost of product X-678. One of the activities, \"Inspection,\" occurs just before the product is finished. Fitzgerald inspects every 10th unit and has been using \"number of units inspected\" as the cost driver for inspection costs. A significant component of inspection costs is the cost of the test kit used in each inspection. Sharon MacPhen, the line manager, is wondering if inspection labor-hours might be a better cost driver for inspection costs. Sharon gathers information for weekly inspection costs, units inspected, and inspection labor-hours as follows: Sharon runs regressions on each of the possible cost drivers and estimates these cost functions: Inspection Costs = $98.79 + ($2.02 x Number of units inspected) Inspection Costs = $3.89 + ($20.06 x Inspection labor-hours) 1. Explain why number of units inspected and inspection labor-hours are plausible cost drivers of inspection costs. 2. Plot the data and regression line for units inspected and inspection costs. Plot the data and regression line for inspection labor-hours and inspection costs. Which cost driver of inspection costs would you choose? Explain. 3. Sharon expects inspectors to work 160 hours next period and to inspect 1,500 units. Using the cost driver you chose in requirement 2, what amount of inspection costs should Sharon budget? Explain any implications of Sharon choosing the cost driver you did not choose in requirement 2 to budget inspection costs

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Carl Warren, William B. Tayler

15th edition

1337912026, 978-1337912020

More Books

Students also viewed these Accounting questions

Question

Self-confidence

Answered: 1 week ago

Question

The number of people commenting on the statement

Answered: 1 week ago