# Gaumer Corporation Case Study

Refer to the attached file as some of the tables did not copy across.

(Appendix 5A) Gaumer Corporation's recent utility costs are listed below:

Management believes that utility cost is a mixed cost that depends on machine-hours.

Using the least-squares regression method, the estimate of the fixed component of utility cost per month is closest to:

(a) $20,834

(b) $6,059

(c) $6,314

(d) $20,449

The management of Dinky Tree Trimming believes that the number of trees trimmed each month is an appropriate activity measure for total operating cost. Shown below are the number of trees trimmed and operating costs in each of the last three months:

What is Dinky's cost formula for monthly operating cost using the least-squares regression method?

(a) Y = $478.40 + $176.80X

(b) Y = $8,840 + $176.80X

(c) Y = $1,625 + $81.25X

(d) Y = $1,655 + $77.50X

Seifer Inc.'s inspection costs are listed below:

Management believes that inspection cost is a mixed cost that depends on the number of units produced. Using the least-squares regression method, the estimates of the variable and fixed components of inspection cost would be closest to:

(a) $24.37 per unit plus $5,658 per month

(b) $24.08 per unit plus $5,709 per month

(c) $67.74 per unit plus $8,858 per month

(d) $24.01 per unit plus $5,727 per month

Seifer Inc.'s inspection costs are listed below:

Management believes that inspection cost is a mixed cost that depends on the number of units produced. Using the least-squares regression method, the estimates of the variable and fixed components of inspection cost would be closest to:

(a) $24.37 per unit plus $5,658 per month

(b) $24.08 per unit plus $5,709 per month

(c) $67.74 per unit plus $8,858 per month

(d) $24.01 per unit plus $5,727 per month

The management of Hamano Corporation would like for you to analyze their repair costs, which are listed below:

Management believes that repair cost is a mixed cost that depends on the number of machine-hours. Using the least-squares regression method, the estimates of the variable and fixed components of repair cost would be closest to:

(a) $8.19 per machine-hour plus $62,015 per month

(b) $22.11 per machine-hour plus $98,497 per month

(c) $7.55 per machine-hour plus $64,859 per month

(d) $7.37 per machine-hour plus $65,670 per month

Comparative income statements for Boggs Sports Equipment Company for the last two months are presented below:

All of the company's costs are either fixed, variable, or a mixture of the two (i.e., mixed). Assume that the relevant range includes all of the activity levels mentioned in this problem.

The total monthly fixed cost for Boggs Sporting Equipment Company is:

(a) $25,000

(b) $22,500

(c) $40,000

(d) $12,000

The following production and average cost data for two levels of monthly production volume have been supplied by a company that produces a single product:

The best estimate of the total monthly fixed manufacturing cost is:

(a) $435,400

(b) $290,500

(c) $227,200

(d) $185,000

The following production and average cost data for two levels of monthly production volume have been supplied by a company that produces a single product:

The best estimate of the total variable manufacturing cost per unit is:

(a) $125.20

(b) $104.10

(c) $75.70

(d) $21.10

The following production and average cost data for two levels of monthly production volume have been supplied by a company that produces a single product:

The best estimate of the total cost to manufacture 2,200 units is closest to:

(a) $356,840

(b) $417,890

(c) $478,940

(d) $460,440

Johnson Company has provided the following data for the first five months of the year:

Machine Hours Lubrication Cost

January 120 $750

February 160 $800

March 200 $870

April 150 $790

May 170 $840

Using the least-squares regression method of analysis, the estimated variable lubrication cost per machine hour is closest to:

(a) $1.28

(b) $1.56

(c) $0.80

(d) $1.40

An income statement for Crandall's Bookstore for the first quarter of the current year is presented below:

On average, a book sells for $50. Variable selling expenses are $5.50 per book, with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales, with the remainder being fixed.

The contribution margin for Crandall's Bookstore for the first quarter is:

(a) $128,000

(b) $152,000

(c) $688,000

(d) $240,000

(Appendix 5A) Lacourse Inc.'s inspection costs are listed below:

Management believes that inspection cost is a mixed cost that depends on units produced.

Using the least-squares regression method, the estimate of the fixed component of inspection cost per month is closest to:

(a) $9,587

(b) $9,608

(c) $15,640

(d) $15,271

(Appendix 5A) Recent maintenance costs of Divers Corporation are listed below:

Management believes that maintenance cost is a mixed cost that depends on machine-hours.

Using the least-squares regression method, the estimate of the variable component of maintenance cost per machine-hour is closest to:

(a) $9.76

(b) $4.57

(c) $4.43

(d) $6.00

(Appendix 5A) Recent maintenance costs of Divers Corporation are listed below:

Management believes that maintenance cost is a mixed cost that depends on machine-hours.

Using the least-squares regression method, the estimate of the fixed component of maintenance cost per month is closest to:

(a) $2,738

(b) $5,139

(c) $4,973

(d) $2,806

(Appendix 5A) Gaumer Corporation's recent utility costs are listed below:

Management believes that utility cost is a mixed cost that depends on machine-hours.

Using the least-squares regression method, the estimate of the variable component of utility cost per machine-hour is closest to:

(a) $8.23

(b) $11.92

(c) $8.45

(d) $8.31

Wayne Company uses a job costing system and applies overhead to jobs using a predetermined overhead rate based on direct labor-hours. The company had the following inventories at the beginning and end of March:

During March total debits to Work in Process were:

(a) $144,000

(b) $230,000

(c) $220,000

(d) $84,000

Wayne Company uses a job costing system and applies overhead to jobs using a predetermined overhead rate based on direct labor-hours. The company had the following inventories at the beginning and end of March:

The Cost of Goods Manufactured for March was:

(a) $212,000

(b) $218,000

(c) $230,000

(d) $236,000

The Milo Company's records for May contained the following information:

The company uses a predetermined overhead rate of $5.00 per direct labor-hour to apply manufacturing overhead to jobs.

The actual overhead cost incurred during the month was:

(a) $50,000

(b) $40,000

(c) $45,000

(d) $55,000

The Milo Company's records for May contained the following information:

The company uses a predetermined overhead rate of $5.00 per direct labor-hour to apply manufacturing overhead to jobs.

The total cost added to Work in Process during May was:

(a) $61,000

(b) $106,000

(c) $111,000

(d) $101,000

Meyers Company had the following inventory balances at the beginning and end of November:

During November, $39,000 in raw materials (all direct materials) were drawn from inventory and used in production. The company's predetermined overhead rate was $8 per direct labor-hour, and it paid its direct labor workers $10 per hour. A total of 300 hours of direct labor time had been expended on the jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account contained $4,700 of direct materials cost. The Company incurred $28,000 of actual manufacturing overhead cost during the month and applied $26,400 in manufacturing overhead cost.

The raw materials purchased during November totaled:

(a) $36,000

(b) $45,000

(c) $39,000

(d) $42,000

Meyers Company had the following inventory balances at the beginning and end of November:

During November, $39,000 in raw materials (all direct materials) were drawn from inventory and used in production. The company's predetermined overhead rate was $8 per direct labor-hour, and it paid its direct labor workers $10 per hour. A total of 300 hours of direct labor time had been expended on the jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account contained $4,700 of direct materials cost. The Company incurred $28,000 of actual manufacturing overhead cost during the month and applied $26,400 in manufacturing overhead cost.

The direct materials cost in the November 1 Work in Process inventory account totaled:

(a) $3,000

(b) $6,000

(c) $3,600

(d) $6,600

#### Solution Summary

Detailed solution to problems in attachment.