COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Textbook Question
Chapter 10, Problem 10.46P
Interpreting regression results, matching time periods. Nandita Summers works at Modus, a store that caters to fashion for young adults. Nandita is responsible for the store’s online advertising and promotion budget. For the past year, she has studied search engine optimization and has been purchasing keywords and display advertising on Google, Facebook, and Twitter. In order to analyze the effectiveness of her efforts and to decide whether to continue online advertising or move her advertising dollars back to traditional print media, Nandita collects the following data:
- 1. Nandita performs a regression analysis, comparing each month’s online advertising expense with that month’s revenue. Verify that she obtains the following result:
Required
- 2. Plot the preceding data on a graph and draw the regression line. What does the cost formula indicate about the relationship between monthly online advertising expense and monthly revenues? Is the relationship economically plausible?
- 3. After further thought, Nandita realizes there may have been a flaw in her approach. In particular, there may be a lag between the time customers click through to the Modus website and peruse its social media content (which is when the online ad expense is incurred) and the time they actually shop in the physical store. Nandita modifies her analysis by comparing each month’s sales revenue to the advertising expense in the prior month. After discarding September revenue and August advertising expense, show that the modified regression yields the following:
- 4. What does the revised formula indicate? Plot the revised data on a graph. Is this relationship economically plausible?
- 5. Can Nandita conclude that there is a cause-and-effect relationship between online advertising expense and sales revenue? Why or why not?
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Chapter 10 Solutions
COST ACCOUNTING
Ch. 10 - What two assumptions are frequently made when...Ch. 10 - Describe three alternative linear cost functions.Ch. 10 - What is the difference between a linear and a...Ch. 10 - High correlation between two variables means that...Ch. 10 - Name four approaches to estimating a cost...Ch. 10 - Describe the conference method for estimating a...Ch. 10 - Describe the account analysis method for...Ch. 10 - List the six steps in estimating a cost function...Ch. 10 - When using the high-low method, should you base...Ch. 10 - Describe three criteria for evaluating cost...
Ch. 10 - Define learning curve. Outline two models that can...Ch. 10 - Discuss four frequently encountered problems when...Ch. 10 - Prob. 10.13QCh. 10 - All the independent variables in a cost function...Ch. 10 - Multicollinearity exists when the dependent...Ch. 10 - HL Co. uses the high-low method to derive a total...Ch. 10 - A firm uses simple linear regression to forecast...Ch. 10 - In regression analysis, the coefficient of...Ch. 10 - A regression equation is set up, where the...Ch. 10 - What would be the approximate value of the...Ch. 10 - Estimating a cost function. The controller of the...Ch. 10 - Identifying variable-, fixed-, and mixed-cost...Ch. 10 - Various cost-behavior patterns. (CPA, adapted)....Ch. 10 - Matching graphs with descriptions of cost and...Ch. 10 - Account analysis, high-low. Stein Corporation...Ch. 10 - Account analysis method. Gower, Inc., a...Ch. 10 - Prob. 10.27ECh. 10 - Estimating a cost function, high-low method. Lacy...Ch. 10 - Linear cost approximation. Dr. Young, of Young and...Ch. 10 - Cost-volume-profit and regression analysis....Ch. 10 - Regression analysis, service company. (CMA,...Ch. 10 - High-low, regression. May Blackwell is the new...Ch. 10 - Learning curve, cumulative average-time learning...Ch. 10 - Learning curve, incremental unit-time learning...Ch. 10 - High-low method. Wayne Mueller financial analyst...Ch. 10 - High-low method and regression analysis. Market...Ch. 10 - High-low method; regression analysis. (CIMA,...Ch. 10 - Regression, activity-based costing, choosing cost...Ch. 10 - Interpreting regression results. Spirit...Ch. 10 - Cost estimation, cumulative average-time learning...Ch. 10 - Cost estimation, incremental unit-time learning...Ch. 10 - Regression; choosing among models. Apollo Hospital...Ch. 10 - Multiple regression (continuation of 10-42). After...Ch. 10 - Cost estimation. Hankuk Electronics started...Ch. 10 - Prob. 10.45PCh. 10 - Interpreting regression results, matching time...Ch. 10 - Purchasing department cost drivers, activity-based...Ch. 10 - Purchasing department cost drivers, multiple...
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