Max Marzolf
Alexis Olszewski
Shane McCellan
Hannah Lomax
Memorandum To: Harper Lewis (Owner)
From: CFO of Camp Forever Young Date: September 10, 2023
In response to your request for a new and improved process for refueling the camp van,
we have completed a cost estimation analysis to reduce the risk of fraud, and also reduce the risk of overdraft fees / running out of gas. We discussed several methods to complete this analysis, but we settled on the least squares regression method as it statistically minimizes error by using a series of mathematical equations to find the best possible fit for a trend line (cost equation). While not perfect, we believe this equation will greatly reduce the risk of fraud, as well as the risk of overdraft fees. Based on the figures below the number of reservations is a better predictor of fuel costs. Looking at the figure 1 we can see that the number of reservations has 47.9% variation in fuel costs. Figure 2 shows that gas prices there was only 1.08% variation in the fuel costs. Fixed cost, also known as an indirect or overhead cost, are business expenses that are dependent on the level of goods and services produced by the business or used by the business. Fixed costs are normally recurring costs, such as wages or rent paid either weekly or monthly and also known as a capital cost. Variable costs are known to be costs that change as the quantity of goods and services that a business produces or purchases changes. They are the sum of marginal cost over all units produced or purchased which can also be considered as a normal cost in every business operation. Both fixed and variable cost combine to form the component of the total cost.
Total cost is the summation of both fixed and variable cost. According to the equation created,Y= f + xV, the fixed cost for Camp Forever Young is the weekly wages while the variable cost can be considered the cost of purchasing fuel for transportation which differs in price daily. In our organization’s case, the variable cost per reservation is $15.53 and the fixed cost is 246.88 for fuel.
As mentioned at the start of this memo, regression analysis cost estimation would be most effective in this scenario. This means much more focus on individual data points, and produces a confidence level of where costs are coming from, including overdraft fees and fraud, to a level where the individual activity per cost object can be identified by its respective expense or revenue, thus a much better visual of these outlying data points, such actions committed such as fraud and overdraft fees would be much easier to identify due to the outlying placement of those expenses in a regression analysis and its focus on precision estimation. Oftentimes, these
acts of ‘fraud’ are not a grand espionage conspiracy, but as an article published in the New York
Times article titled Why We Lie by Dan Ariely, are a summation of ‘little lies everywhere’ this self-serving, seemingly immaterial lying or fraud, such as spending more than authorized, overdrafting the company card, and just taking the consequence/punishment at work as the cost
of doing business. This, as the article explains, can and will bleed throughout a company’s (or a society’s) culture, leading to the small, self-serving acts of fraud to snowball. Self-evidently, this
