unit. 43. High-Low, Seattergraph, and Regression Analysis; Manufacturing Company. Kitchen Products, Inc., produces kitchen counter tops. Manufacturing overhead costs tend to fluctuate from one month to the next, and management would like to accurately estimate these costs for planning and decision-making purposes. The accounting staff at Kitchen Products recommends that costs be broken down into fixed and variable components. Because the production process is highly automated, most of the manufacturing overhead costs are related to machinery and equipment. The accounting staff believes the best starting point is to review historical data for costs and machine hours: Reporting Period (Month) Total Costs Machine Hours January $278,000 1,550 February 280,000 1,570 March 266,000 1,115 April 290,000 1,700 May 262.000 June 269,000 1,225 July 275,000 1,335 August 286,000 1,660 September 250,000 October 253,000 November 260.000 1,025 December 281,000 1,600 These data were entered into a computer regression program, which produced the following output: 1.110 1.000 1.020 These data were entered into a computer regression program, which produced the following output: Coefficients y-intercept 210,766 x variable 45-31 Required: a. Use the four steps of the high-low method to estimate total fixed costs per month and the variable cost per machine hour. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for fand u. b. Use the five steps of the scattergraph method to estimate total fixed costs per month, and the variable cost per machine hour. State your results in the cost equation form Y = f+ vX by filling in the dollar amounts for fand v. c. Use the regression output given to develop the cost equation Y = f + vX by filling in the dollar amounts for fand v. d. Use the results of the high-low method (a), scattergraph method (b), and regression analysis (e), to estimate costs for 1,300 machine hours. (You will have three different answers--one for each method.) Which approach do you think is most accurate and why? e. Management likes the regression analysis approach and asks you to estimate costs for 5.000 machine hours using this approach (the company plans to expand by opening another facility and hiring additional employees). Calculate your estimate, and explain why your estimate might be misleading. PROBLEMS (continued) 43. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company Answers may vary slightly due to rounding the variable cost per unit in step 2. a. Step 1: Identify the high and low activity levels from the data set. Low machine hours: 1000 total cost $250,000 High machine hours: 1700 total cost $290,000 Difference machine hours: 700 total cost $40,000 Step 2: Calculate the variable cost per unit (v); units are measured in machine hours. Unit variable cost (v) $290,000 1,700 hours $250,000 1,000 hours 1 $40,000 700 hours V- $57.14 per machine hour (rounded) Step 3: Calculate the total fixed costs . Step 3: Calculate the total fixed costs (). f = $192,862 Show your calculation of total fored costs here: Step 4: State the results in equation form Y = f + vX. Variable cost per machine hour is from step 2, and total fixed costs are from step 3. Thus, the equation used to estimate total costs is stated as: Y = VUOLEMS (Conneu) 3. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company (continued) b. Answers will vary depending on where the cost line is visually fit to the data points. Step 1: Fill in the columns below to plot the data points in the graph that follows. Reporting Period Total Machine (Month) Costs Hours January February March April May June July August September October November December Step 2: Visually fit a line to the data points and make sure the line touches one data point. (Note that the line may touch several data points, in which case one must be selected in step 3.) Note: Step 2 can be done outside of this spreadsheet and does not need to be submitted. However, you will need information from this step to complete Step 3 Total Overhead Costs Machine Hours 43. b. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company (continued) Step 3: Estimate the total fixed costs (). Provide answer here: Step 4: Calculate the variable cost per unit (v); units are measured in machine hours. Provide answer here: Step 5: State the results in equation form Y=5+ vX. Y c The cost equation using the data from regression analysis is Y $45131 X d. High-low method Y X Y machine hours) Y Scattergraph method 1 X Y Y X machine hours) Regression analysis: X I machine hours) It d. High-low method: Y x Y + + machine hours) Y = Scattergraph method: Y = X Y X machine hours) Y + + + + Regression analysis: Y 10 X Y II machine hours) Y = Provide answer to last part of d here: 43. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company (continued) e. Using the regression analysis equation, substitute machine hours for X and solve for Y: Y = machine hours) Y Provide answer to last part of e here: unit 43. High-Low, Scattergraph, and Regression Analysis; Manufacturing Company. Kitchen Products, Inc., produces kitchen counter tops. Manufacturing overhead costs tend to fluctuate from one month to the next, and management would like to accurately estimate these costs for planning and decision-making purposes. The accounting staff at Kitchen Products recommends that costs be broken down into fixed and variable components. Because the production process is highly automated, most of the manufacturing overhead costs are related to machinery and equipment. The accounting staff believes the best starting point is to review historical data for costs and machine hours: Reporting Period (Month) Total Costs Machine Hours January S278,000 1.550 February 280,000 1.570 March 266,000 1.115 April 290.000 1.700 May 262.000 1.110 June 269,000 July 275,000 1.335 August 286,000 1,660 September 250.000 1.000 October 253,000 1.020 November 260.000 1,025 December 281,000 1,000 These data were entered into a computer regression program, which produced the following output: Coefficients These data were entered into a computer regression program, which produced the following output: Coefficients y-intercept 210,766 x variable 45-31 Required: a. Use the four steps of the high-low method to estimate total fixed costs per month and the variable cost per machine hour. State your results in the cost equation form Y = f+ vX by filling in the dollar amounts for fand v. b. Use the five steps of the scattergraph method to estimate total fixed costs per month, and the variable cost per machine hour. State your results in the cost equation form Y = f +vX by filling in the dollar amounts for fand v. c. Use the regression output given to develop the cost equation Y=f+uX by filling in the dollar amounts for fand u. d. Use the results of the high-low method (a), scattergraph method (b), and regression analysis (c), to estimate costs for 1,300 machine hours. (You will have three different answers-one for each method.) Which approach do you think is most accurate and why? e. Management likes the regression analysis approach and asks you to estimate costs for 5,000 machine hours using this approach (the company plans to expand by opening another facility and hiring additional employees). Calculate your estimate, and explain why your estimate might be misleading, 44. High-Low, Scattergraph, and Regression Analysis; Service Company. Hernandez Accounting Company prepares tax returns for individuals. Marie Hernandez, the owner, would like an accurate estimate of the company's costs for planning and decision-making purposes. When Marie asks you to devise a way to estimate costs on a monthly basis, you recall the importance of breaking costs into fixed and variable components. Because the company's costs are driven primarily by the number of tax returns prepared, you decide to use historical data for costs and tax returns prepared: Reporting Period (Month) Total Costs Returns Prepared January $157.000 315 Feh 200 43. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company Answers may vary slightly due to rounding the variable cost per unit in step 2. a. Step 1: Identify the high and low activity levels from the data set. Low machine hours: 1000 total cost $250,000 High machine hours: 1700 total cost $290,000 Difference machine hours: 700 total cost $40,000 Step 2: Calculate the variable cost per unit (v); units are measured in machine hours. Unit variable cost (v) $250,000 1,000 hours $290,000 1,700 hours $40,000 700 hours D E F G H I J K L M NO P Q R 1,700 hours 1,000 hours V = $40,000 700 hours $57.14 per machine hour (rounded) Step 3: Calculate the total fixed costs 0. f = $192,862 Show your calculation of total fixed costs here: Step 4: State the results in equation form Y = f + vX. Variable cost per machine hour is from step 2. and total fixed costs are from step 3. B C E F G H I J K L M N O P Q R S T Step 4: State the results in equation form Y = f + vX. Variable cost per machine hour is from step 2, and total fixed costs are from step 3. Thus, the equation used to estimate total costs is stated as: Y = X 43. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company (continued) b. Answers will vary depending on where the cost line is visually fit to the data points. Step 1: Fill in the columns below to plot the data points in the graph that follows. Reporting Period Total Machine (Month) Costs Hours January February March April May June July August September October November December Step 2: Visually fit a line to the data points and make sure the line touches one data point. (Note that the line may touch several data points, in which case one must be selected in step 3.) Note: Step 2 can be done outside of this spreadsheet and does not need to be submitted. However, you will need information from this Step to complete Step Total Overhead Cost Machine Hours - ABC E F G H K Step 2: Visually fit a line to the data points and make sure the line touches one data point. (Note that the line may touch several data points, in which case one must be selected in step 3.) Total Overhead Costs Machine Hours Note: Step 2 can be done outside of this spreadsheet and does not need to be submitted. However, you will need information from this step to complete Step 3. d. High-low method: Y + Y + machine hours) Y Scattergraph method: Y X + + Y machine hours) Y Regression analysis: Y + Y + X machine hours) Y Provide answer to last part of d here: PROBLEMS (continued) 43. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company (continued) e. Using the regression analysis equation, substitute machine hours for X and solve for Y: Y machine hours) Y X Provide answer to last part of e here: unit. 43. High-Low, Seattergraph, and Regression Analysis; Manufacturing Company. Kitchen Products, Inc., produces kitchen counter tops. Manufacturing overhead costs tend to fluctuate from one month to the next, and management would like to accurately estimate these costs for planning and decision-making purposes. The accounting staff at Kitchen Products recommends that costs be broken down into fixed and variable components. Because the production process is highly automated, most of the manufacturing overhead costs are related to machinery and equipment. The accounting staff believes the best starting point is to review historical data for costs and machine hours: Reporting Period (Month) Total Costs Machine Hours January $278,000 1,550 February 280,000 1,570 March 266,000 1,115 April 290,000 1,700 May 262.000 June 269,000 1,225 July 275,000 1,335 August 286,000 1,660 September 250,000 October 253,000 November 260.000 1,025 December 281,000 1,600 These data were entered into a computer regression program, which produced the following output: 1.110 1.000 1.020 These data were entered into a computer regression program, which produced the following output: Coefficients y-intercept 210,766 x variable 45-31 Required: a. Use the four steps of the high-low method to estimate total fixed costs per month and the variable cost per machine hour. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for fand u. b. Use the five steps of the scattergraph method to estimate total fixed costs per month, and the variable cost per machine hour. State your results in the cost equation form Y = f+ vX by filling in the dollar amounts for fand v. c. Use the regression output given to develop the cost equation Y = f + vX by filling in the dollar amounts for fand v. d. Use the results of the high-low method (a), scattergraph method (b), and regression analysis (e), to estimate costs for 1,300 machine hours. (You will have three different answers--one for each method.) Which approach do you think is most accurate and why? e. Management likes the regression analysis approach and asks you to estimate costs for 5.000 machine hours using this approach (the company plans to expand by opening another facility and hiring additional employees). Calculate your estimate, and explain why your estimate might be misleading. PROBLEMS (continued) 43. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company Answers may vary slightly due to rounding the variable cost per unit in step 2. a. Step 1: Identify the high and low activity levels from the data set. Low machine hours: 1000 total cost $250,000 High machine hours: 1700 total cost $290,000 Difference machine hours: 700 total cost $40,000 Step 2: Calculate the variable cost per unit (v); units are measured in machine hours. Unit variable cost (v) $290,000 1,700 hours $250,000 1,000 hours 1 $40,000 700 hours V- $57.14 per machine hour (rounded) Step 3: Calculate the total fixed costs . Step 3: Calculate the total fixed costs (). f = $192,862 Show your calculation of total fored costs here: Step 4: State the results in equation form Y = f + vX. Variable cost per machine hour is from step 2, and total fixed costs are from step 3. Thus, the equation used to estimate total costs is stated as: Y = VUOLEMS (Conneu) 3. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company (continued) b. Answers will vary depending on where the cost line is visually fit to the data points. Step 1: Fill in the columns below to plot the data points in the graph that follows. Reporting Period Total Machine (Month) Costs Hours January February March April May June July August September October November December Step 2: Visually fit a line to the data points and make sure the line touches one data point. (Note that the line may touch several data points, in which case one must be selected in step 3.) Note: Step 2 can be done outside of this spreadsheet and does not need to be submitted. However, you will need information from this step to complete Step 3 Total Overhead Costs Machine Hours 43. b. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company (continued) Step 3: Estimate the total fixed costs (). Provide answer here: Step 4: Calculate the variable cost per unit (v); units are measured in machine hours. Provide answer here: Step 5: State the results in equation form Y=5+ vX. Y c The cost equation using the data from regression analysis is Y $45131 X d. High-low method Y X Y machine hours) Y Scattergraph method 1 X Y Y X machine hours) Regression analysis: X I machine hours) It d. High-low method: Y x Y + + machine hours) Y = Scattergraph method: Y = X Y X machine hours) Y + + + + Regression analysis: Y 10 X Y II machine hours) Y = Provide answer to last part of d here: 43. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company (continued) e. Using the regression analysis equation, substitute machine hours for X and solve for Y: Y = machine hours) Y Provide answer to last part of e here: unit 43. High-Low, Scattergraph, and Regression Analysis; Manufacturing Company. Kitchen Products, Inc., produces kitchen counter tops. Manufacturing overhead costs tend to fluctuate from one month to the next, and management would like to accurately estimate these costs for planning and decision-making purposes. The accounting staff at Kitchen Products recommends that costs be broken down into fixed and variable components. Because the production process is highly automated, most of the manufacturing overhead costs are related to machinery and equipment. The accounting staff believes the best starting point is to review historical data for costs and machine hours: Reporting Period (Month) Total Costs Machine Hours January S278,000 1.550 February 280,000 1.570 March 266,000 1.115 April 290.000 1.700 May 262.000 1.110 June 269,000 July 275,000 1.335 August 286,000 1,660 September 250.000 1.000 October 253,000 1.020 November 260.000 1,025 December 281,000 1,000 These data were entered into a computer regression program, which produced the following output: Coefficients These data were entered into a computer regression program, which produced the following output: Coefficients y-intercept 210,766 x variable 45-31 Required: a. Use the four steps of the high-low method to estimate total fixed costs per month and the variable cost per machine hour. State your results in the cost equation form Y = f+ vX by filling in the dollar amounts for fand v. b. Use the five steps of the scattergraph method to estimate total fixed costs per month, and the variable cost per machine hour. State your results in the cost equation form Y = f +vX by filling in the dollar amounts for fand v. c. Use the regression output given to develop the cost equation Y=f+uX by filling in the dollar amounts for fand u. d. Use the results of the high-low method (a), scattergraph method (b), and regression analysis (c), to estimate costs for 1,300 machine hours. (You will have three different answers-one for each method.) Which approach do you think is most accurate and why? e. Management likes the regression analysis approach and asks you to estimate costs for 5,000 machine hours using this approach (the company plans to expand by opening another facility and hiring additional employees). Calculate your estimate, and explain why your estimate might be misleading, 44. High-Low, Scattergraph, and Regression Analysis; Service Company. Hernandez Accounting Company prepares tax returns for individuals. Marie Hernandez, the owner, would like an accurate estimate of the company's costs for planning and decision-making purposes. When Marie asks you to devise a way to estimate costs on a monthly basis, you recall the importance of breaking costs into fixed and variable components. Because the company's costs are driven primarily by the number of tax returns prepared, you decide to use historical data for costs and tax returns prepared: Reporting Period (Month) Total Costs Returns Prepared January $157.000 315 Feh 200 43. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company Answers may vary slightly due to rounding the variable cost per unit in step 2. a. Step 1: Identify the high and low activity levels from the data set. Low machine hours: 1000 total cost $250,000 High machine hours: 1700 total cost $290,000 Difference machine hours: 700 total cost $40,000 Step 2: Calculate the variable cost per unit (v); units are measured in machine hours. Unit variable cost (v) $250,000 1,000 hours $290,000 1,700 hours $40,000 700 hours D E F G H I J K L M NO P Q R 1,700 hours 1,000 hours V = $40,000 700 hours $57.14 per machine hour (rounded) Step 3: Calculate the total fixed costs 0. f = $192,862 Show your calculation of total fixed costs here: Step 4: State the results in equation form Y = f + vX. Variable cost per machine hour is from step 2. and total fixed costs are from step 3. B C E F G H I J K L M N O P Q R S T Step 4: State the results in equation form Y = f + vX. Variable cost per machine hour is from step 2, and total fixed costs are from step 3. Thus, the equation used to estimate total costs is stated as: Y = X 43. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company (continued) b. Answers will vary depending on where the cost line is visually fit to the data points. Step 1: Fill in the columns below to plot the data points in the graph that follows. Reporting Period Total Machine (Month) Costs Hours January February March April May June July August September October November December Step 2: Visually fit a line to the data points and make sure the line touches one data point. (Note that the line may touch several data points, in which case one must be selected in step 3.) Note: Step 2 can be done outside of this spreadsheet and does not need to be submitted. However, you will need information from this Step to complete Step Total Overhead Cost Machine Hours - ABC E F G H K Step 2: Visually fit a line to the data points and make sure the line touches one data point. (Note that the line may touch several data points, in which case one must be selected in step 3.) Total Overhead Costs Machine Hours Note: Step 2 can be done outside of this spreadsheet and does not need to be submitted. However, you will need information from this step to complete Step 3. d. High-low method: Y + Y + machine hours) Y Scattergraph method: Y X + + Y machine hours) Y Regression analysis: Y + Y + X machine hours) Y Provide answer to last part of d here: PROBLEMS (continued) 43. High-Low, Scattergraph, and Regression Analysis: Manufacturing Company (continued) e. Using the regression analysis equation, substitute machine hours for X and solve for Y: Y machine hours) Y X Provide answer to last part of e here