1.
Draw a graph of the data.
1.

Explanation of Solution
Draw a graph of the data.
Figure (1)
2.
Compute quarterly
2.

Explanation of Solution
High-low method:
The graph in part (1) shows that high and low points are last and second data points, so these points develop the estimate of high-low.
Calculate the variable cost.
Calculate the fixed cost.
Compute quarterly prediction for the year 2019.
2019 Quarter | Return Expenses |
13 | $14,930 |
14 | $15,260 |
15 | $15,590 |
16 | $15,920 |
Table (1)
Note: Shown below is the formula to compute quarterly prediction.
These predictions do not take into account the seasonal variation as shown in the data, it is always useful to take into considerationthe results for a regression analysis as shown in part (3).
3.
Compute the quarterly forecast for 2019 using the results of a regression analysis. Calculate the result of regression analysis and necessary changes to improve the model.
3.

Explanation of Solution
Regression one:
Regression Statistics | |
Multiple R | 0.439734422 |
R Square | 0.193366362 |
Adjusted R Square | 0.112702998 |
Standard Error | 974.8928577 |
Observations | 12 |
Table (2)
ANOVA | |||||
df | SS | MS | F | Significance F | |
Regression | 1 | 2278339.161 | 2278339 | 2.397202 | 0.152593037 |
Residual | 10 | 9504160.839 | 950416.1 | ||
Total | 11 | 11782500 | |||
Table (3)
Table (4)
Regression Predictions | |
Intercept | $11,855 |
Coefficient | $126.22 |
Table (5)
Quarterly Predictions | |
13 | $13,496 |
14 | $13,622 |
15 | $13,748 |
16 | $13,875 |
Table (6)
Note: Shown below is to compute rent expense.
Predicted expense for next four quarter using regression analysis:
Quarter | Regression prediction | |
13 | | 13,495.45 |
14 | | 13,621.68 |
15 | | 13,747.90 |
16 | | 13,874.13 |
Table (7)
This shows how the regression model’s prediction differ from that of high-low method.
The above regression one has relatively low R-Squared (0.19) and low t-value for the independent variable, a revision of the regression model is considered. Since, there is visible seasonality in the data, by adding dummy variable it is possible to improve on the regression model with 1s in the periods 4,8, and 12, and 0s in the left-over periods. For the dummy variable the below given regression analysis indications a much higher R-Squared, improved SE and a substantial t-value.
Regression 2:
Regression Statistics | |
Multiple R | 0.873681599 |
R Square | 0.763319537 |
Adjusted R Square | 0.710723879 |
Standard Error | 556.6454641 |
Observations | 12 |
Table (8)
ANOVA | |||||
df | SS | MS | F | Significance F | |
Regression | 2 | 8993812.445 | 4496906.223 | 14.51297616 | 0.00152662 |
Residual | 9 | 2788687.555 | 309854.1728 | ||
Total | 11 | 11782500 |
Table (9)
Table (10)
Equation for the above regression are:
Regression Predictions | |
Intercept | $11,252.65 |
Coefficient Qtr. | $137.34 |
Coefficient Season | $1,589 |
Table (11)
The regression prediction for the revised regression:
Quarterly Predictions | |
13 | $14,627 |
14 | $13,175 |
15 | $13,313 |
16 | $15,039 |
Table (12)
The management accountant should depend on the above shown prediction because the second regression has better statistical measures.
4.
Explain how the analysis of costs change, if L Incorporation produces its products in multiple global production facilities to serve the global market.
4.

Explanation of Solution
If L Incorporation produces its products in multiple global production facilities, then the expenses incurred from returns has to be studied by the production facility. Due to various equipment used in manufacturing the DVD players, the cost incurred are likely to differ among the production facility.
Want to see more full solutions like this?
Chapter 8 Solutions
COST MANAGMENT WITH CONNECT ACCESS
- Please don't use AI And give correct answer .arrow_forwardLouisa Pharmaceutical Company is a maker of drugs for high blood pressure and uses a process costing system. The following information pertains to the final department of Goodheart's blockbuster drug called Mintia. Beginning work-in-process (40% completed) 1,025 units Transferred-in 4,900 units Normal spoilage 445 units Abnormal spoilage 245 units Good units transferred out 4,500 units Ending work-in-process (1/3 completed) 735 units Conversion costs in beginning inventory $ 3,250 Current conversion costs $ 7,800 Louisa calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of Mintia that are spoiled are the result of defects not discovered before inspection of finished units. Materials are added at the beginning of the process. Using the weighted-average method, answer the following question: What are the…arrow_forwardQuick answerarrow_forward
- Financial accounting questionarrow_forwardOn November 30, Sullivan Enterprises had Accounts Receivable of $145,600. During the month of December, the company received total payments of $175,000 from credit customers. The Accounts Receivable on December 31 was $98,200. What was the number of credit sales during December?arrow_forwardPaterson Manufacturing uses both standards and budgets. For the year, estimated production of Product Z is 620,000 units. The total estimated cost for materials and labor are $1,512,000 and $1,984,000, respectively. Compute the estimates for: (a) a standard cost per unit (b) a budgeted cost for total production (Round standard costs to 2 decimal places, e.g., $1.25.)arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





