Cost Estimation, Interpretation, and Analysis (Requires Computer Spreadsheet) Brady Table Company produces two styles of modern dining
Question:
Cost Estimation, Interpretation, and Analysis (Requires Computer Spreadsheet")
Brady Table Company produces two styles of modern dining room and kitchen tables. Presented is monthly information on production volume and manufacturing costs:
Required
a. Use the high-low method to develop a cost-estimating equation for total manufacturing costs. Interpret the meaning of the “fixed” costs and comment on the results.
b. Use the chart feature of a spreadsheet to develop a scatter graph of total manufacturing costs and total units produced. Use the graph to identify any unusual observations.
c. Excluding any unusual observations, use the high-low method to develop a cost-estimating equation for total manufacturing costs. Comment on the results, comparing them with the results in requirement (a).
d. Use simple regression analysis to develop a cost-estimating equation for total manufacturing costs.
What advantages does simple regression analysis have in comparison with the high-low method of cost estimation? Why must analysts carefully evaluate the data used in simple regression analysis?
e. Acustomer has offered to purchase 50 dining room tables for $220 per table. Management has asked your advice regarding the desirability of accepting the offer. What advice do you have for management? Additional analysis is required.
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