Chapter 2: The Cost Function
2.30
Page 2-19
Tax Plus
A. Hours for two returns would be determined as follows; using the learning curve equation Y = Xr Learning rate = 80% = 6 hours X (units produced) = 2 Learning rate = (ln 0.80/ln2) = Y = 6 hours2-0.3219 Y = 4.8 hours (average time for each of the next two returns) B.
Cumulative Average Hours Per Return
Graph of Learning Curve 7 6 5 4 3 2 1
2
3
4
Cumulative Number of Returns Prepared
As the accounting graduates become more familiar with the tasks involved in preparing simple tax returns, their productivity increases. However, as their performance improves, it improves less quickly for the next return. Eventually their learning will plateau, and their productivity rate will remain stable.
2.31
Cost Function Using Regression, Other Potential Cost Drivers
A. TC = $222.35units sold Notice that the T-statistic on the intercept (fixed cost) indicates that it is not likely to be different from zero. Therefore, the fixed cost is set at zero. B. The adjusted R-Square indicates how much of the variation in the marketing department cost can be explained by variation in units sold. In this problem, the variation in units sold explains about 61% of the variation in marketing department cost.
Eldenburg & Wolcott 2e
Solutions August 2010