Question

Cost Estimation, Interpretation, and Analysis (Requires Computer Spreadsheet) L03
Brady Table Company produces two styles of modern dining room and kitchen tables. Presented is
monthly information on production volume and manufacturing costs:
Total Dining Room Kitchen--- Please show formulas thanks

	Total Manufacturing Costs	Total Tables Produced	Dining Room Tables Produced	Kitchen Tables Produced
Jun-17	$69,975	375	75	300
July	76,332	308	185	150
August	90,945	428	158	270
September	59,615	315	60	255
October	63,180	263	11	150
November	78,863	315	165	150
December	79,527	368	135	233
Jan-18	70,988	375	75	300
February	70,853	330	105	225
March	66,713	270	120	150
April	146,700	473	270	203
May	89,900	420	158	263
June	78,065	383	113	270
July	83,070	353	165	188
August	69,335	293	128	165
September	90,653	390	180	210
October	80,562	375	135	240
November	86,400	405	150	255
December	56,475	248	90	158

Required
a. Use the high-low method to develop a cost-estimating equation for total manufacturing costs.Interpret the meaning of the “fixed” costs and comment on the results.

b. Use the chart feature of a spreadsheet to develop a scatter graph of total manufacturing costs and
total units produced. Use the graph to identify any unusual observations.
c. Excluding any unusual observations, use the high-low method to develop a cost-estimating equation
for total manufacturing costs. Comment on the results, comparing them with the results in requirement (a).
d. Use simple regression analysis to develop a cost-estimating equation for total manufacturing costs.
What advantages does simple regression analysis have in comparison with the high-low method of
cost estimation? Why must analysts carefully evaluate the data used in simple regression analysis?
e. A customer has offered to purchase 50 dining room tables for $220 per table. Management has asked
your advice regarding the desirability of accepting the offer. What advice do you have for management? Additional analysis is required.

Answer 1