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3-38 Mixed Cost, Choosing Cost Drivers, and High-Low and Visual-Fit

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3-38 Mixed Cost, Choosing Cost Drivers, and High-Low and Visual-Fit Methods
Cedar Rapids Implements Company produces farm implements. Cedar Rapids is in the process of
measuring its manufacturing costs and is particularly interested in the costs of the manufacturing
maintenance activity, since maintenance is a significant mixed cost. Activity analysis indicates that
maintenance activity consists primarily of maintenance labor setting up machines using certain supplies.
A setup consists of preparing the necessary machines for a particular production run of a product.
During setup, machines must still be running, which consumes energy. Thus, the costs associated
with maintenance include labor, supplies, and energy. Unfortunately, Cedar Rapid’s cost accounting
system does not trace these costs to maintenance activity separately. Cedar Rapids employs two fulltime
maintenance mechanics to perform maintenance. The annual salary of a maintenance mechanic
is $25,000 and is considered a fixed cost. Two plausible cost drivers have been suggested: “units produced”
and “number of setups.”
Data had been collected for the past 12 months and a plot made for the cost driver—units of production.
The maintenance cost figures collected include estimates for labor, supplies, and energy.
Cory Fielder, controller at Cedar Rapids, noted that some types of activities are performed each time
a batch of goods is processed rather than each time a unit is produced. Based on this concept, he has
gathered data on the number of setups performed over the past 12 months. The plots of monthly maintenance
costs versus the two potential cost drivers follow on page 122.
1. Find monthly fixed maintenance cost and the variable maintenance cost per driver unit using
the visual-fit method based on each potential cost driver. Explain how you treated the April
data.
2. Find monthly fixed maintenance cost and the variable maintenance cost per driver unit using the
high-low method based on each potential cost driver.
3. Which cost driver best meets the criteria for choosing cost functions? Explain.
Submitted: 4 years ago.
Category: Homework
Expert:  Linda_us replied 4 years ago.

Linda :

Thanks for requesting me. The question talks about a graph, can you please upload that.

Customer :

FOR LINDA

Customer :

I've tried

Linda :

You can upload them on www.mediafire.com or www.box.net and can share the link here

Customer :

let me try

Customer :

can I send you an email?

Linda :

No we are not allowed to share email. Its against JA policy.

Customer :

I can't get to those sites right now, I'll have to try again. be right back

Linda :

Are you there?

Customer :

I'll have to try again tomorrow

Linda :

wait i think found something

Linda :

Click here for See graph Does your graph looks like this

Customer :

yes, that is it

Customer :

I'll check back tomorrow

Customer :

thanks

Linda :

Thanks for the update, I will post the solution by tomorrow afternoon, if you need earlier than that then please let me know. By the way I have answered two other question for you in other posts if you need any further explanation on that please let know. Do you know expert get credit for their work only when you click accept?

Customer :

Thank you. I've been clicking on accept. This afternoon is fine. I'll have one more question as well. I'll back and click on accept for them all again this afternoon. Thank you.

Customer :

Hi linda, was there an answer for this?

Linda :

Give me two minutes. I have been working on it since morning just finshed it.

Customer :

oh, ok, I get confused with all these emails. sorry

Linda :

Please note that I get credit for my work only when you click accept.

Customer :

did you get credit for the first two?

Linda :

I will now starting working on your fourth question should be done by today evening or by tomorrow afternoon. Thank I got the credit for first two answers.

Linda_us, Finance, Accounts & Homework Tutor
Category: Homework
Satisfied Customers: 7126
Experience: Post Graduate Diploma in Management (MBA)
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