Requirements 1. Using the high-low method to estimate costs, prepare a prediction of overhead costs for 2010. 2. Sandy ran a regression analysis using the quarterly data she collected. The result was: Y = $347 + $5.72X. Using this cost function (based on quarterly data), predict overhead costs for 2010. 3. Which prediction do you prefer? Why?
Requirements 1. Using the high-low method to estimate costs, prepare a prediction of overhead costs for 2010. 2. Sandy ran a regression analysis using the quarterly data she collected. The result was: Y = $347 + $5.72X. Using this cost function (based on quarterly data), predict overhead costs for 2010. 3. Which prediction do you prefer? Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
Topic Video
Question
Answer showing excel with calculations for high- low method and linear regression
Transcribed Image Text:Quarter
1/06
2/06
3/06
4/06
1/07
2/07
3/07
4/07
1/08
2/08
3/08
4/08
1/09
Production
in Units
Overhead
Costs
74 $
77
72
134
123
126
123
131
122
127
113
82
82
717
711
661
1,126
997
1,107
1,115
1,038
987
1,062
992
953
831
Transcribed Image Text:On November 15, 2009, Sandra Cook, a newly hired cost analyst at Peterson Company, was asked to predict overhead costs for the company's operations in 2010, when 510 units are expected to
be produced. She collected the following quarterly data:
(Click the icon to view the quarterly data.)
Requirements
1. Using the high-low method to estimate costs, prepare a prediction of overhead costs for 2010.
2. Sandy ran a regression analysis using the quarterly data she collected. The result was: Y = $347 + $5.72X. Using this cost function (based on quarterly data), predict overhead costs for 2010.
3. Which prediction do you prefer? Why?
C
Requirement 1. Using the high-low method to estimate costs, prepare a prediction of overhead costs for 2010.
Begin by estimating the cost function for a quarter year using the high-low method. (Enter the quarterly fixed cost rounded to two decimal places and the variable cost rounded to four
decimal places.)
(Round your answer to two decimal places.)
Using the high-low method, the predicted overhead costs for 2010 is $
Requirement 2. Sandy ran a regression analysis using the quarterly data she collected. The result was: Y = $347 + $5.72X. Using this cost function (based on quarterly data), predict overhead costs
for 2010. (Round your answer to two decimal places.)
The predicted overhead costs for 2010 is $
Requirement 3. Which prediction do you prefer? Why?
The
▼gives better cost estimates because it uses ▼ data to form a cost function. The data used by the
relation between costs and volume.
▼may not be representative of the general
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