Explore BrainMass

# Accounting: Linear regression and Activity Based Costing.

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

See attached file for better format.

Favata Company has the following information:
Month Budgeted Sales
June \$60,000
July 51,000
August 40,000
September 70,000
October 72,000
In addition, the cost of goods sold rate is 70% and the desired inventory level is 30% of next month's cost of sales.
Prepare a purchases budget for July through September.

Trustme Vehicle Rental Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways.
Car Rental Truck Rental
Number of Vehicles in fleet 700 300
Number of employees 150 50
Sales \$1,500,000 \$750,000

1. If administrative expense of \$125,000 is allocated on the basis of number of employees, the amount allocated to the Truck Rental Department would be:
2. If administrative expense of \$125,000 is allocated on the basis of number of employees, the amount allocated to the Car Rental Department would be:
3. If advertising expense of \$150,000 is allocated on the basis of sales, the amount allocated to the Car Rental Department would be:
4. If advertising expense of \$225,000 is allocated on the basis of sales, the amount allocated to the Truck Rental Department would be:
5. If the facility lease expense of \$350,000 is allocated on the basis of vehicles in the fleet, the amount allocated to the Truck Rental Department would be:

Konrade's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows:
Direct materials \$40,000
Direct labor 10,000
Total costs \$100,000

It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Konrade's Engine Company has the option of purchasing the part from an outside supplier at \$85 per unit.
If Konrade's Engine Company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total
\$ 82,000
\$ 98,000
\$ 50,000
\$100,000

The cost components of an air conditioner include \$35 for the compressor, \$11.50 for the sheet molded compound frame, and \$80 per unit for assembly. The factory machines and tools cost is \$55,000. The company expects to produce 1,500 air conditioners in the coming year. What cost function best represents these costs?

y = 1500 + 126.5X
y = 1,500 +55,000X
y = 55,000 +126.50X
y = 55,000 + 1,500X

Merriamn Company provides the following ABC costing information:
Activities Total Costs Activity-cost drivers
Account inquiry hours \$400,000 10,000 hours
Account billing lines \$280,000 4,000,000 lines
Account verification accounts \$150,000 40,000 accounts
Correspondence letters \$ 50,000 4,000 letters
Total costs \$880,000

The above activities are used by Department A and B as follows:
Department A Department B
Account inquiry hours 2,000 hours 4,000 hours
Account billing lines 400,000 lines 200,000 lines
Account verification accounts 10,000 accounts 8,000 accounts
Correspondence letters 1,000 letters 1,600 letters
How much of the account billing cost will be assigned to Department B?
\$80,000
\$14,000
\$28,000
\$280,000