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    This document provides examples of linear cost functions for 4 different cost drivers: a) direct labor of $10 per hour, b) direct materials of $9.20 per cubic yard, c) utilities with a $1,000 minimum plus $0.05 per kilowatt-hour, and d) machine costs of $200,000 annual depreciation plus $75 per day of operation. For each cost driver, a linear cost function equation is given with the estimated cost (y) dependent on the relevant activity or cost driver (X) amount.

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    AB-27

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    This document provides examples of linear cost functions for 4 different cost drivers: a) direct labor of $10 per hour, b) direct materials of $9.20 per cubic yard, c) utilities with a $1,000 minimum plus $0.05 per kilowatt-hour, and d) machine costs of $200,000 annual depreciation plus $75 per day of operation. For each cost driver, a linear cost function equation is given with the estimated cost (y) dependent on the relevant activity or cost driver (X) amount.

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    8 views1 page

    Ab 27

    Uploaded by

    Spade X
    This document provides examples of linear cost functions for 4 different cost drivers: a) direct labor of $10 per hour, b) direct materials of $9.20 per cubic yard, c) utilities with a $1,000 minimum plus $0.05 per kilowatt-hour, and d) machine costs of $200,000 annual depreciation plus $75 per day of operation. For each cost driver, a linear cost function equation is given with the estimated cost (y) dependent on the relevant activity or cost driver (X) amount.

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    © All Rights Reserved
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    of 1

    1. Write a linear cost function equation for each of the following conditions.

    Use y
    for estimated costs and X for activity of the cost driver.
    a. Direct manufacturing labor is $10 per hour.
    b. Direct materials cost $9.20 per cubic yard.
    c. Utilities have a minimum charge of $1,000, plus a charge of $0.05 per
    kilowatt-hour.
    d. Machine operating costs include $200,000 of machine depreciation per year,
    plus $75 of utility costs for each day the machinery is in operation.
    Answer:
    a. y = $10X
    b. y = $9.20X
    c. y = $1,000 + $0.05X
    d. y = $200,000 + $75X
    Difficulty: 1 Objective: 1
    Terms to Learn: linear cost function

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