Balloons, cupcakes, and punch Labor (0.25 hour × $20 per hour) Overhead (0.25 hour × $40 per hour) Total cost per person 5 10 $22 %24 Month Labor-Hours Overhead Costs April May $ 65,000 1,400 71,000 1,800 June 2,100 73,000 July August September 2,200 76,000 1,650 67,000 1,725 68,000 October 1,500 66,500 November 1,200 60,000 December 1,900 72,500 Total 15,475 $619,000 Linda has recently become aware of regression analysis. She estimated the following regression equation with overhead costs as the dependent variable and labor-hours as the independent variable: y = $43,563 + $14.66X Required Plot the relationship between overhead costs and labor-hours. Draw the regression line and evaluate it using the criteria of economic plausibility, goodness of fit, and slope of the regression line. Using data from the regression analysis, what is the variable cost per person for a standard party? Linda Olson has been asked to prepare a bid for a 20-child birthday party to be given next month. Deter- mine the minimum bid price that Linda would be willing to submit to recoup variable costs. 1. 2. 3.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Regression analysis, service company. (CMA, adapted) Linda Olson owns a professional character business in a large metropolitan area. She hires local college students to play these characters at children’s parties and other events. Linda provides balloons, cupcakes, and punch. For a standard party the cost on a per-person basis is as follows:
Linda is quite certain about the estimates of the materials and labor costs, but is not as comfortable with the overhead estimate. The overhead estimate was based on the actual data for the past 9 months, which are presented here. These data indicate that overhead costs vary with the direct labor-hours used. The $40 estimate was determined by dividing total overhead costs for the 9 months by total labor-hours.
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