Lexon, Inc., is a large manufacturer of affordable DVD players. Management recently became aware of rising costs resulting from returns of malfunctioning products. As a starting point for further analysis, Paige Jennings, the controller, wants to test different forecasting methods and then use the best one to forecast quarterly expenses for 2016. The relevant quarterly data for the previous three years follow:

The result of a simple regression analysis using all 12 data points yielded an intercept of $11,855 and a coefficient for the independent variable of $126.22. (R-squared = 0.44, SE = $975)
Required
1. Calculate the quarterly forecast for 2016 using the high-low method and regression analysis. Recommend which method Paige should use and explain why.
2. How does your analysis in requirement 1 change if Lexon manufactures its products in multiple global production facilities to serve the global market?

Transcribed Image Text:

2013 Quarter Return Expenses 2014 Quarter Return Expenses $12,900 12,100 11,700 14,000 2015 Quarter Return Expenses $12,500 11,300 11,600 13,700 $13,300 12,300 12,100 14,600