Some of the next 5 questions are based on the following information (as well as the information provided previously about PPC)

The Hi-Tech Pen Company (HPC) is one of PPC's main competitors. The main difference between HPC and PPC is the use of technology in the design and manufacturing process. Unlike PPC, HPC relies heavily on computer programs to design their pens. Unlike PPC, HPC also relies heavily on automation in the form of machines in its manufacturing process.

As a result of these differences, HPC changes its product portfolio frequently (i.e., a particular HPC pen model may only be in the market for 1 - 2 years before it is replaced with an entirely new model) and has a diverse product range (where some of its pens are produced in large quantities with others are produced in smaller quantities).

When HPC first started operations, its early product profitability reports indicated that its simpler pen models, which were produced in large quantities, were significantly less profitable (on a per unit basis) than the more complex models, which were produced in small quantities. This did not make sense to management as it was in direct contradiction to their intuition. Upon further investigation, the management accounting team found an error and therefore changed the way that profitability was calculated in the report.

Question 30

What is the (ONE) most likely explanation why HPC's early product profitability report had erroneously indicated that its simpler pen models were significantly less profitable (on per unit basis) than its more complex models?

Question 31

HPC management is currently trying to find a way to accurately predict its future machine maintenance cost.

What could HPC use its prediction of future machine maintenance cost for? Provide ONE use for such a prediction for HPC. Explain.

Question 32

HPC is considering whether it should use units of output OR machine hours as the independent variable to help predict its future machine maintenance cost. What is your advice to HPC? Explain.

Question 33

Describe TWO scenarios under which the machine maintenance cost function estimated with your chosen independent variable in the previous question would no longer be valid / appropriate (after initially being valid / appropriate)? Explain.

Question 34

In contrast to HPC, PPC owns a single machine that needs to be regularly maintained every 6 months. PPC ensures that maintenance is always done on schedule. The cost of this regular maintenance was fixed (pre-determined) when PPC purchased the machine from the vendor. Should PPC estimate a cost function for its machine maintenance cost? Explain why / why not.