Name Unit 4-Activity #2 Cost Estimation Problem 1 For February, the cost components of a picture frame include 50.30 for the glass, $0.75 for the wooden frame, and $0.80 for assembly. The assembly desk and tools cost $500. Two hundred fifty frames are expected to be produced in the coming year. 1. What cost function best represents these costs? 2. What is the total expected costs for the picture frames for the coming year? Problem 2 At the Verill Company, the cost of the library and information center has always been charged to the various departments based upon number of employees. Recently, opinions gathered from the department managers indicate that the number of engineers within a department might be a better predictor of library and information center costs. Total library and information center costs are $200,000. Number of employees 135 530 135 Number of engineers 0 80 20 If the number of employees is considered the cost driver, what amount of library and information center costs will be allocated to Department A? 1. 2. If the number of engineers is considered the cost driver, what amount of library and information center costs will be allocated to Department A? 3. Which cost estimation technique is being used by Verill Company? Name Unit 4-Activity #2 Cost Estimation Problem 3 Uninder Company uses the high-low method to estimate the cost function. The information for 2015 is provided below: Highest observation of cost driver 550 $22,000 $ 13,000 Lowest observation of cost driver 250 1. What is the slope coefficient? 2. What is the constant for the estimated cost equation? 3. What is the estimated cost function for the above data? 4. What is the estimated total cost when 400 machine-hours are used? Problem 4 The Frontive Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Frontive Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation. Cost $24,700 5,000 26,0005,500 34,000 7,500 45,370 8,000 9,500 Hours 10,300 1. What is the cost function? 2. What is the estimated total cost at an operating level of 9,000 hours