Problem 5-54 Methods of Cost Analysis: Account Analysis, Simple and Multiple Regression Using a Spreadsheet (Appendix A) (LO 5-3, 4, 5, 7, 8)

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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 460,000 cases of products in Brazil next month. The controller has classified operating costs (excluding costs of the distributed product) as follows:

Account	Operating Cost			Behavior
Supplies	$	330,000		All variable
Supervision		205,000		$	140,000	Fixed
Truck expense		1,390,000		$	180,000	Fixed
Building leases		855,000		$	550,000	Fixed
Utilities		200,000		$	115,000	Fixed
Warehouse labor		870,000		$	140,000	Fixed
Equipment leases		760,000		$	600,000	Fixed
Data processing equipment		875,000		All fixed
Other		860,000		$	410,000	Fixed
Total	$	6,345,000

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	Cases			Price Index			Operating Costs
1		348,000			118		$	5,789,139
2		365,000			120			5,896,638
3		361,000			121			5,939,905
4		383,000			125			6,017,617
5		377,000			127			6,029,135
6		398,000			128			6,133,364
7		370,000			131			6,008,495
8		415,000			136			6,223,868
9		401,000			136			6,216,130
10		424,000			135			6,276,625
11		420,000			139			6,298,799
12		435,000			142			6,452,255

These data are considered representative for both past and future operations in Brazil.

References

Section BreakProblem 5-54 Methods of Cost Analysis: Account Analysis, Simple and Multiple Regression Using a Spreadsheet (Appendix A) (LO 5-3, 4, 5, 7, 8)

3.

value: 10.00 points

Required information

Problem 5-54 Part a

Required:
(a)	Compute an estimate of operating costs assuming that 460,000 cases will be shipped next month based on the controller's analysis of accounts.

References

eBook & Resources

ProblemLearning Objective: 05-03 Estimate costs using account analysis.Learning Objective: 05-07 Evaluate the advantages and disadvantages of alternative cost estimation methods.

Problem 5-54 Part aLearning Objective: 05-04 Estimate costs using statistical analysis.Learning Objective: 05-08 (Appendix A) Use Microsoft Excel to perform a regression analysis.

Difficulty: 3 HardLearning Objective: 05-05 Interpret the results of regression output.

Check my work

4.

value: 10.00 points

Required information

Problem 5-54 Part b

(b)	Use the high-low method to compute an estimate of operating costs assuming that 460,000 cases will be shipped next month. (Round variable costs to five decimal places. Round your other intermediate calculations and final answer to nearest whole dollar value.)