40 Part 3 Kendrick Anderson Furniture Maker, LLC creates custom tables in Atlanta. Assume that the following represents monthly information on production volume and manufacturing costs since the company started operations Total Living Room Manufacturing Dining Room Total Tables Tables Tables Costs Produced Produced Produced June Year 1 $71,000 110 25 85 July. 57.500 90 45 45 August 79,724 130 15 115 September 64,250 95 36 59 October 57,300 76 24 52 November 60,900 92 48 44 December 62,700 105 24 81 January Year 2 70,130 110 60 February 68,400 102 20 82 March 57,400 81 25 56 April 105,790 142 102 May 74.750 125 22 103 June 74,290 115 15 100 July 66,500 106 18 88 August 49,888 85 28 57 September 72,668 116 55 61 October 71.700 120 81 39 November 74,200 120 30 90 December 54.900 72 18 54 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. A customer has offered to purchase 50 dining room tables for S452 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. . 40 Part 3 Kendrick Anderson Furniture Maker, LLC creates custom tables in Atlanta. Assume that the following represents monthly information on production volume and manufacturing costs since the company started operations Total Living Room Manufacturing Dining Room Total Tables Tables Tables Costs Produced Produced Produced June Year 1 $71,000 110 25 85 July. 57.500 90 45 45 August 79,724 130 15 115 September 64,250 95 36 59 October 57,300 76 24 52 November 60,900 92 48 44 December 62,700 105 24 81 January Year 2 70,130 110 60 February 68,400 102 20 82 March 57,400 81 25 56 April 105,790 142 102 May 74.750 125 22 103 June 74,290 115 15 100 July 66,500 106 18 88 August 49,888 85 28 57 September 72,668 116 55 61 October 71.700 120 81 39 November 74,200 120 30 90 December 54.900 72 18 54 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. A customer has offered to purchase 50 dining room tables for S452 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