Odle Company manufactures a popular brand of cat repellant known as Cat-B-Gone, which it sells in gallon-size bottles with a spray attachment. The majority of Odie's business comes from orders placed by homeowners who are trying to keep neighborhood cats out of their yards. Odie's operating information for the first six months of the year follows: Month January February March April May June Number of Bottles Sold 1,000 1,100 1,300 2,000 2,400 3,000 Operating Cost $8,000 7,700 9,900 14,000 17,250 20,000
Odle Company manufactures a popular brand of cat repellant known as Cat-B-Gone, which it sells in gallon-size bottles with a spray attachment. The majority of Odie's business comes from orders placed by homeowners who are trying to keep neighborhood cats out of their yards. Odie's operating information for the first six months of the year follows: Month January February March April May June Number of Bottles Sold 1,000 1,100 1,300 2,000 2,400 3,000 Operating Cost $8,000 7,700 9,900 14,000 17,250 20,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Transcribed Image Text:Odle Company manufactures a popular brand of cat repellant known as Cat-B-Gone, which it sells in gallon-size bottles with a spray
attachment. The majority of Odie's business comes from orders placed by homeowners who are trying to keep neighborhood cats out
of their yards. Odie's operating information for the first six months of the year follows:
Month
January
February
March
April
May
June
Number of
Bottles Sold
1,000
1,100
1,300
2,000
2,400
3,000
Operating
Cost
$ 8,000
7,700
9,900
14,000
17,250
20,000
Required:
3. Using the high-low method, calculate Odie's total fixed operating costs and variable operating cost per bottle.
4. Perform a least-squares regression analysis on Odie's data.
5. Determine how well this regression analysis explains the data.
6. Using the regression output, create a linear equation (y a+ bx) for estimating Odie's operating costs.
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Step 1: High-low method:
VIEWStep 2: (3) Calculate Odie’s total fixed operating costs and variable operating cost per bottle:
VIEWStep 3: (4) Perform a least-squares regression analysis on Odie’s data:
VIEWStep 4: (5) Explain the regression data:
VIEWStep 5: (6) Create a linear equation (y=a+bx) for estimating Odie’s operating costs:
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