Purchase Solution

Which cost driver should American Micro Devices use? Why?

Not what you're looking for?

Ask Custom Question

See the attached file.

Y=$9,000/week + ($6 x direct labor hours); R^2=.10
Y=$20,000/week + ($14 x number of boards completed); R^2=.40
Y=$5,000/week + ($350 x average cycle time); R^2=.80

1. Which of the support cost functions would you expect to be the most reliable for explaining and predicting support costs? Why?

2. Assume that American Micro Devices prices it products by adding a percentage markup to its product costs. Product costs include assembly labor, components, and support costs. Using each of the cost functions, compute the circuit board portion of the support cost of an order that used the following resources:
a. Effectively used the capacity of the assembly department for 3 weeks
b. Assembly labor hours: 20,000
c. Number of boards: 6,000
d. Average cycle time: 180 hours

3. Which cost driver would you recommend that American Micro Devices use? Why?

4. Assume that the market for this product is extremely cost competitive. What do you think of American Micro Devices pricing method?

Attachments
Purchase this Solution
Solution Summary

The tutorial includes the steps to solve for the costs and a recommendation for a cost driver.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

View More Free Quizzes
Related BrainMass Solutions

  • Choice of Cost Driver

    Ellis believes that average cycle time will be the best support cost driver. Mr. Ellis wants his analyst to use regression analysis to demonstrate which cost driver best explains support costs.

  • Cost Drivers for the American Micro Devices

    266627 Cost Drivers for the American Micro Devices Richard Ellis, the director of cost operations of American Micro Devices, wishes to develop an accurate cost function to explain and predict support costs in the company's printed circuit board assembly

  • Cost apportionment through regression and high-low method

    Richard Ellis, the director of cost operations of American Micro devices, wishes to develop an accurate cost function to explain and predict support costs in the companys printed circuit board assembly operation. Mr.

  • Regional for profit business

    Micro moments The emerging media micro-moments for Abilitech Assist are to use augmented reality or virtual reality for displaying the features and functioning of Assist.

  • Marketing Plan

    Identify the appropriate price strategy that should be used for the product or service and explain why you consider it appropriate The price will be $229.50 and this supports a low price fast penetration strategy.

  • Micro-Regulating Healthcare

    . ___________________________ Ways US be seen to Micro-Regulate Health Care American health care is known to be best in the world, but instead of its extraordinary achievements, the cost, quality, and accessibility of American health care have

  • NPV and Cash Flow

    Computer Whiz Company(CWC) (cost $75 million) Probability Aftertax Cash Flows for 10 Years ($ millions) 0.3 $6 0.3 $10 0.2 $16 0.2 $25 American Micro-Technology(AMT) (cost $75 million)

  • Social Change: Health Care

    A key driver is this spring's passage of the Patient Protection and Affordable Care Act (PPACA), but the more fundamental causes are the twin crises we face for access and rising cost for health coverage.

  • Cost driver and cost of job

    Should Montgomery use direct labor or machine hours as a cost driver. Why? B. Assume that the company decided to use direct labor as its cost driver.

View More Related Solutions