Question
Mesa Table Company produces two styles of tables, dining room and kitchen. The Excel file that accompanies this problem presents information on production volume and
Mesa Table Company produces two styles of tables, dining room and kitchen. The Excel file that accompanies this problem presents information on production volume and manufacturing costs. A customer has made a special offer to purchase 50 dining room tables for $230 per table. The production manager has indicated that next months capacity is sufficient to accommodate the order without impacting planned production, and projected sales are already above our breakeven point. The sales representative working with the customer has looked at the above production and recommends accepting the special order, based on his calculations of (1) average cost calculation of just under $217.75 per table and (2) an incremental cost per table using his high-low analysis of just under $211.35. REQUIRED: Answer the following questions below, supported with calculations on your completed Excel file. 1. The sales rep has asked you to verify his above calculations. Answer below. 2. Believing he can impress management with a simple regression analysis, he asks you to develop a cost-estimation equation for total production and manufacturing costs. What is your models cost function prediction, and how much confidence do you have in its predictive ability? 3. What do the two calculations provided by the sales rep and your simple regression suggest regarding the desirability of accepting the offer? 4. Management has asked you to provide additional analysis of manufacturing costs to determine whether the order should be accepted. Note this may require additional analysis and critical thinking. What does your new analysis suggest regarding the desirability of accepting the offer?
Data:
| Kitchen Tables Produced | Total Tables Produced | Total Manufacturing Costs |
| 200 | 250 | $46,650 |
| 100 | 205 | $50,888 |
| 180 | 285 | $60,630 |
| 170 | 210 | $37,943 |
| 100 | 175 | $42,120 |
| 100 | 210 | $52,575 |
| 155 | 245 | $53,018 |
| 200 | 250 | $47,325 |
| 150 | 220 | $47,235 |
| 100 | 180 | $44,475 |
| 135 | 315 | $69,350 |
| 175 | 280 | $59,933 |
| 180 | 255 | $52,043 |
| 125 | 235 | $55,380 |
| 110 | 195 | $46,223 |
| 180 | 300 | $60,120 |
| 140 | 260 | $60,435 |
| 160 | 250 | $53,708 |
| 170 | 270 | $57,600 |
| 105 | 165 | $37,650 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial accounting
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel
IFRS Edition
9781119153726, 978-1118285909
