M S Java run by two graduates of the university have
M&S Java, run by two graduates of the university, have just opened their take-out coffee and snack bar on the university campus. At the end of their first month of operations they want to understand which cost driver to choose of two available that they already track in their management information system. The first alternative is kilograms of coffee used each day and the second alternative is cups. M&S Java shuts down completely one day each month to clean and test all equipment thoroughly to make sure they will pass any health inspections.
Form groups of two or more students to complete the following requirements:
1. Using the account analysis method, knowing the fixed cost is $572 for the month, what is the forecast value of consuming 65 kg of coffee beans?
2. If M&S Java use 65 kg of coffee beans, then what is the forecast indirect cost for using the high-low method based on actual values provided in the table?
3. If M&S Java chose linear regression to predict the future MOH costs, then examining the line graphs and the statistics what is the better choice of cost driver for this indirect cost pool and what justifies that choice?
4. If M&S Java use 65 kg of coffee beans, then contrast the results from this requirement to those of requirement 3 and comment on the difference.
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