SATULUI VORU 10-32 High-low method; regression analysis. (CIMA, adapted) Anna Schaub, the financial manager at the Mangiamo restaurant, is checking to see if there is any relationship between newspaper advertising and sales revenues at the restaurant. She obtains the following data for the past 10 months. Month March April May June July August September October November December Revenues $51,000 72,000 56,000 64,000 56,000 64,000 43,000 83,000 56,000 61,000 Advertising Costs $1,500 3,500 1,000 4,000 500 1,500 1,000 4,500 2,000 2,000 She estimates the following regression equation: Monthly revenues = $46,443 + ($6.584 x Advertising costs) 1. Plot the relationship between advertising costs and revenues. Also draw the regression line and evaluate it using the criteria of economic plausibility, goodness of fit, and slope of the regression line. 2 Use the high-low method to compute the function relating advertising costs and revenues. 3. Using (a) the regression equation and (b) the high-low equation, what is the increase in revenues for each $1,000 spent on advertising within the relevant range? Which method should Schaub use to predict the effect of advertising costs on revenues? Explain briefly. ucts, reports the follow December 31, 2014. 4. Next month, Luwak export calls, and use 64,000 gallons of water. Estimate total CUSTUI 10-21 Account analysis method. Gower, Inc., a manufacturer of plastic products, manufacturing costs and account analysis classification for the year ended December 2 Amount $300,000 Account Direct materials Direct manufacturing labor Power Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, property taxes, and administration Classification All variable All variable All variable 20% variable 50% variable 40% variable 0% variable 0% variable 225,000 37,500 56,250 60,000 75,000 95,000 100,000 estimating costs for 2015 Gower, Inc., produced 75,000 units of product in 2014. Gower's management is estimating costs for the basis of 2014 numbers. The following additional information is available for 2015. a. Direct materials prices in 2015 are expected to increase by 5% compared with 2014 b. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to incresel 10% in 2015 compared with 2014. C. Power rates and wage rates for supervision, materials handling, and maintenance are not expecte change from 2014 to 2015. d. Depreciation costs are expected to increase by 5%, and rent, property taxes, and administration cost expected to increase by 7%. e. Gower expects to manufacture and sell 80,000 units in 2015. 1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in Estimate total manufacturing costs for 2015. 2. Calculate Gower's total manufacturing cost per unit in 2014, and estimate total manufacturing C unitin 2015 3. How can you obtain better estimates of fixed and variable costs? Why would these better esum useful to Gower