Caiman Distribution Partners is the Brazilian distribution company of a U.S. consumer products firm. Inflation in Brazil has made bidding and budgeting difficult for marketing managers trying to penetrate some of the country's rural regions. The company expects to distribute 450,000 cases of products in Brazil next month. The controller has classified operating costs (excluding costs of the distributed product) as follows. Account Supplies Supervision Truck expense Building leases Utilities Warehouse labor Equipment leases Data processing equipment Other Operating cost $ 382,000 208,000 1,280,000 870,000 224,000 852,000 762,000 931,000 859,000 $6,368,000 Behavior All variable $130,000 Fixed $189,000 Fixed $534,000 Fixed $115,000 Fixed $124,000 Fixed $607,000 Fixed All fixed $408,000 Fixed Total Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to the managers that they should incorporate information from a published index of Brazilian prices in the distribution sector to forecast overhead in a manner more likely to capture the economics of the business. Following instructions from the corporate offices, the controller's office in Brazil collected the following information for monthly operations from last year. Month NO OWN Cases 310,000 358,000 343,000 373,000 360,000 378,000 381,000 419,000 362,000 425,000 403,000 426,000 Price Index 122 114 120 121 128 115 128 129 131 141 135 Operating costs $5,699,143 5,806,642 5,849,909 5,927,621 5,939,139 6,043, 368 5,918,499 6,133,872 6, 126, 134 6,186,629 6,208,803 6,362, 259 These data are considered representative for both past and future operations in Brazil. b. Use the high-low method to compute an estimate of operating costs assuming that 450,000 cases will be shipped next month. (Round variable cost to 5 decimal places. Round intermediate calculations and final answer to nearest whole dollar amount.) Estimate of operating cost C-1. Using Excel, calculate the simple regression of operating costs on cases shipped and enter the regression coefficients. c-2. Compute the estimation of operating costs assuming that 450,000 cases will be shipped next month by using the results of a simple regression of operating costs on cases shipped. d-1. Enter the regression coefficients. d-2. Compute the estimation of operating costs assuming that 450,000 cases will be shipped next month by using the results of a multiple regression of operating costs on cases shipped and the price level. Assume a price level of 141 for next month. e. Select the most appropriate estimate for the given circumstances. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) Multiple regression Controller's analysis Simple regression High-low method
