Motor Racer Pty Ltd is a manufacturer of timing components for speedways. The company's accountant, Casey...
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Motor Racer Pty Ltd is a manufacturer of timing components for speedways. The company's accountant, Casey Stoner is concerned with maintenance technician costs and has recently compiled the costs for the firm's Maintenance Department. He used the technician hours to quantify the Department's activity. Casey presents the following data for analysis. Month July August September October November December January February March April May June Technician hours 1,200 1,600 1,800 1,330 1,700 1,600 1,400 1,350 1,460 1,660 1,700 1,500 Maintenance costs $62,500 $78,150 $83,000 $65,800 $79,900 $72,250 $66,600 $63,550 $69,110 $73,800 $79,500 $70,250 Required: Note all calculations are to be rounded to nearest cents 1. Using the high-low method, calculate; a. Determine the highest point, the lowest point and the maintenance costs at theses points b. The variable cost per unit of cost driver, c. The fixed cost, and d. Write the cost equation based on high-low method. 2. Casey wants to predict next month's maintenance cost using the high low cost equation. How much will be the maintenance costs when technician hours total 1,550. 3. Construct an Excel® spreadsheet and use least squares regression analysis to estimate the Maintenance Department's: a. Variable cost per unit of cost driver b. Fixed cost, and c. Cost equation for the department's costs. d. When is multiple regression required to explain cost behaviour? 4. What if Casey wants to use regression analysis cost formulae in Part 3 (c) to estimate maintenance cost for next month when he expects technician's hours to be 1,550. How much will be the estimated maintenance cost? 5. Explain the significance of the coefficient of determination measures for cost formulas. Why should these measures be considered when using the method of least squares? 6. Describe the method of least square. Why does the cost prediction estimate using the high-low and regression methods differ? Which method would you recommend? Justify your answer. Motor Racer Pty Ltd is a manufacturer of timing components for speedways. The company's accountant, Casey Stoner is concerned with maintenance technician costs and has recently compiled the costs for the firm's Maintenance Department. He used the technician hours to quantify the Department's activity. Casey presents the following data for analysis. Month July August September October November December January February March April May June Technician hours 1,200 1,600 1,800 1,330 1,700 1,600 1,400 1,350 1,460 1,660 1,700 1,500 Maintenance costs $62,500 $78,150 $83,000 $65,800 $79,900 $72,250 $66,600 $63,550 $69,110 $73,800 $79,500 $70,250 Required: Note all calculations are to be rounded to nearest cents 1. Using the high-low method, calculate; a. Determine the highest point, the lowest point and the maintenance costs at theses points b. The variable cost per unit of cost driver, c. The fixed cost, and d. Write the cost equation based on high-low method. 2. Casey wants to predict next month's maintenance cost using the high low cost equation. How much will be the maintenance costs when technician hours total 1,550. 3. Construct an Excel® spreadsheet and use least squares regression analysis to estimate the Maintenance Department's: a. Variable cost per unit of cost driver b. Fixed cost, and c. Cost equation for the department's costs. d. When is multiple regression required to explain cost behaviour? 4. What if Casey wants to use regression analysis cost formulae in Part 3 (c) to estimate maintenance cost for next month when he expects technician's hours to be 1,550. How much will be the estimated maintenance cost? 5. Explain the significance of the coefficient of determination measures for cost formulas. Why should these measures be considered when using the method of least squares? 6. Describe the method of least square. Why does the cost prediction estimate using the high-low and regression methods differ? Which method would you recommend? Justify your answer.
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Answer rating: 100% (QA)
Using the highlow method a To determine the highest and lowest points we look at the technician hours and maintenance costs provided Highest point Technician hours 1800 Maintenance costs 83000 Lowest ... View the full answer
Related Book For
Financial Theory and Corporate Policy
ISBN: 978-0321127211
4th edition
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
Posted Date:
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