Cost Estimation, Interpretation, and Analysis (requires computer spreadsheet)

Newport Table Company produces two styles of tables, dining room and kitchen. Attached is monthly information on production volume and manufacturing costs.

Total Manufacturing Period June 2010.......... $46,650 July ............... 50,888 August ............ 60,630 September ......... 39,743 October ........... 42,120 November.......... 52,575 December.......... 53,018 January 2011 47,325 February ........... 47,235 March ............. 44,475 April .............. 97,800 May............... 59,933 June .............. 52,043 July ............... 55,380 August ............ 46,223 September ......... 60,435 October ........... 53,708 November.......... 57,600 December.......... 37,650 ### 250 205 285 210 175 210 245 250 220 180 315 280 255 235 195 260 250 270 165 Dining Room Tables Produced 50 105 105 40 75 110 90 50 70 80 180 105 75 110 85 120 90 100 60 Kitchen Tables Produced 200 100 180 170 100 100 155 200 150 100 135 175 180 125 110 140 160 170 105 4,455 1,700 2,755 Total Tables 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 pro 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 highlow 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 $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. uring costs. uring costs and total units produced. Use the graph to identify any unusual observations. th the results nufacturing nagement has you have for