31 High Low, Scattergraph, and Regression Analysis Manufacturing Company Woodworks, Inc , produces cabinet doors Manufacturing overhead costs tend to fluctuate from one month to the next, and management would like to accurately estimate these costs for planning and decision making purposes The accounting staff at Woodworks recommends that costs be broken down into fixed and variable components Because the production process is highly automated, most of the manufacturing overhead costs are related to machinery and equipment The accounting staff believes the best starting point is to review historical data for costs and machine hours Reporting Period (Month) Total Costs Machine Hours January $278,000 1,550 February 280,000 1,570 March 266,000 1,115 April 290,000 1,700 May 262,000 1,110 June 269,000 1,225 July 275,000 1,335 August 286,000 1,660 September 250,000 1,000 October 253,000 1,020 November 260,000 1,025 December 281,000 1,600 These data were entered into a computer regression program, which produced the following output Coefficients y intercept 210,766 x variable 45 31 Required Use the four steps of the high low method to estimate total fixed costs per month and the variable cost per machine hour State your results in the cost equation form Y f v X by filling in the dollar amounts for f and v Use the five steps of the scattergraph method to estimate total fixed costs per month, and the variable cost per machine hour State your results in the cost equation form Y f v X by filling in the dollar amounts for f and v Use the regression output given to develop the cost equation Y f v X by filling in the dollar amounts for f and v Use the results of the high low method (a), scattergraph method (b), and regression analysis (c), to estimate costs for 1,500 machine hours (You will have three different answersone for each method ) Which approach do you think is most accurate and why Management likes the regression analysis approach and asks you to estimate costs for 5,000 machine hours using this approach (the company plans to expand by opening another facility and hiring additional employees) Calculate your estimate, and explain why your estimate might be misleading

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31. High-Low, Scattergraph, and Regression Analysis; Manufacturing Company. Woodworks, Inc., produces cabinet doors. Manufacturing overhead costs tend to fluctuate from one month to the next,

31. High-Low, Scattergraph, and Regression Analysis; Manufacturing Company. Woodworks, Inc., produces cabinet doors. Manufacturing overhead costs tend to fluctuate from one month to the next, and management would like to accurately estimate these costs for planning and decision-making purposes.

The accounting staff at Woodworks recommends that costs be broken down into fixed and variable components. Because the production process is highly automated, most of the manufacturing overhead costs are related to machinery and equipment. The accounting staff believes the best starting point is to review historical data for costs and machine hours:

Reporting Period (Month)	Total Costs	Machine Hours
January	$278,000	1,550
February	280,000	1,570
March	266,000	1,115
April	290,000	1,700
May	262,000	1,110
June	269,000	1,225
July	275,000	1,335
August	286,000	1,660
September	250,000	1,000
October	253,000	1,020
November	260,000	1,025
December	281,000	1,600

These data were entered into a computer regression program, which produced the following output:

	Coefficients
y-intercept	210,766
x variable	45.31

Required:

Use the four steps of the high-low method to estimate total fixed costs per month and the variable cost per machine hour. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v.

Use the five steps of the scattergraph method to estimate total fixed costs per month, and the variable cost per machine hour. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v.
Use the regression output given to develop the cost equation Y = f + vX by filling in the dollar amounts for f and v.
Use the results of the high-low method (a), scattergraph method (b), and regression analysis (c), to estimate costs for 1,500 machine hours. (You will have three different answersone for each method.) Which approach do you think is most accurate and why

Management likes the regression analysis approach and asks you to estimate costs for 5,000 machine hours using this approach (the company plans to expand by opening another facility and hiring additional employees). Calculate your estimate, and explain why your estimate might be misleading.