Question
LMN Inc wants to analyze its cost behavior. The following data is available for the past six months: Month Units Produced Total Costs ($) Jan
LMN Inc wants to analyze its cost behavior. The following data is available for the past six months:
Month | Units Produced | Total Costs ($) |
Jan | 1,000 | 50,000 |
Feb | 1,500 | 65,000 |
Mar | 2,000 | 80,000 |
Apr | 2,500 | 95,000 |
May | 3,000 | 110,000 |
Jun | 3,500 | 125,000 |
Required: a. Use the high-low method to estimate the fixed and variable components of total costs. b. Perform a regression analysis to determine the cost equation. c. Compare the results from the high-low method and regression analysis. d. Explain the advantages and limitations of using regression analysis in cost behavior analysis.
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Managerial Accounting
Authors: Ramji Balakrishnan, Konduru Sivaramakrishnan, Geoff B. Sprinkle
2nd edition
1118385381, 978-1118385388
