Determining Fixed vs$.$ ?Variable Cost Components Using Excel $($Diagnostic Analytics$)$

Genesee Industries introduced a new product last year $(6582-$D$).$ ?Although it was very popular, it wasn$?$t very profitable. Management has asked you to provide them with information to help them set a sales price that will provide them with a monthly gross profit of $$7,500.($Last year$?$s sales price was $$75$ ?per unit.$)$ ?

You know that the direct costs per unit are $$25$ ?for direct materials and $$5$ ?for direct labor. You are given information about last year$?$s monthly production levels and manufacturing overhead costs $($indirect materials, indirect labor, and other$).$ ?That information is included in the file linked here.

Required

Note: Round all answers to two decimals.

a$.$ ?Determine the cost formula for $6582-$D$.$ ?Use Excel$?$s regression analysis tool to develop a cost$-$estimating equation for total fixed and variable manufacturing costs. Use the regression tool three times $($once for indirect materials, once for indirect labor, and once for other overhead$).$ ?Use the information from each analysis, along with the direct cost information to estimate the cost equation.

Hint: Click on $95\%$ ?confidence level box and check the box to add a Line fit plot for each indirect cost element to show the relationship in chart form.

Hint: You may need to change the minimum bound on the horizontal axis to $700$ ?to see the line clearly on each chart.

b$.$ ?Use the prior year data to create a graph of the various overhead costs by month. Create a Combo chart as follows. Hint: Under the Insert tab, click on Insert Combo chart.

$1.$ ?The primary vertical axis in dollars, and the secondary vertical axis is units of production. Hint: Click the Secondary axis box for units produced.

$2.$ ?The horizontal axis is Months.

$3.$ ?Units produced should be a Clustered column type; the overhead cost elements should be Line type.

$4.$ ?Describe the trend in the overhead components based on a review of your chart.

c$.$ ?Use Excel$?$s Goal Seek tool to determine the sales price required to meet the $$7,500$ ?gross profit goal. Management believes monthly sales will average $1,500$ ?next year. Assume the company will not maintain any inventory of finished goods. Hint: In a schedule in Excel, enter number of units, variable manufacturing cost per unit and total fixed costs, and a formula for gross profit. Use the Goal Seek tool to find the sales price. Goal seek is found under the Data tab, and under What$-$if Analysis.

d$.$ ? In what areas would Goal Seek help management in decision$-$making?

Units produced Indirect Materials Indirect Labor Other MOH January 1,000 5,150.00 21,750.00 31,510.00 February 1,200 5,756.00 22,120.00 33,391.00 March 1,150 5,558.50 22,180.00 31,903.00 April 980 5,097.00 21,535.00 30,995.20 May 1,050 5,354.00 21,797.50 32,572.50 June 1,150 5,558.50 22,065.00 32,332.00 July 1,090 5,388.50 22,108.00 32,126.10 August 1,170 5,675.60 21,993.40 33,927.40 September 925 4,957.75 21,493.75 30,066.50 October November 980 5,097.00 21,662.40 30,485.00 1,025 5,224.75 21,773.75 32,048.75 December 825 4,686.25 21,418.75 29,291.25