Beruflich Dokumente
Kultur Dokumente
Solutions to Exercises
5-23. (15 min.) Methods of Estimating CostsAccount Analysis: Miller Fixtures.
a. Cost estimate with new costs and volume.
Last Years
Cost
Cost Item
Direct
materials
Direct
labor ..........
Variable
overhead ...
Fixed
Overhead ..
Total
costs ..........
(1)
Cost
Change
(1 + Cost
Increase)
(2)
This Years
Cost
(at last
years
volume)
(1) x (2) =
(3)
$210,000
120%
$252,000
175,000
104%
182,000
154,000
100%
154,000
240,000
110%
264,000
$779,000
$3.71
$4.00
Growth in
Volume
This Years
Cost
(4)
220,000
210,000
220,000
210,000
220,000
210,000
(fixed)
= $264,000
= 190,667
=
161,333
= 264,000
$880,000
(= $779,000 210,000)
(= $880,000 220,000)
5-6
Overhead
Costs
$564,210
$503,775
Variable cost
=
Fixed
costs
Machine
Hours
8,020
6,490
$564,210 $503,775
8,020 6,490
=
=
$247,420
= $39.50
or
Fixed
costs
=
=
=
5-9
5-49. (40 min.) Methods of Cost AnalysisAccount Analysis, Simple and Multiple
Regression Using Spreadsheets: Caiman Distribution Partners.
a. Estimating equation based on account analysis:
Cost Item
Supplies ................................
Supervision ...........................
Truck expense ......................
Building leases ......................
Utilities ..................................
Warehouse labor...................
Equipment leases .................
Data processing equipment ..
Other .....................................
Total ......................................
=
=
=
Estimated overhead
=
=
=
=
Operating Cost
$ 350,000
215,000
1,200,000
855,000
215,000
860,000
760,000
945,000
850,000
$6,250,000
Fixed Cost
$
0
150,000
190,000
550,000
125,000
140,000
600,000
945,000
400,000
$3,100,000
Variable
$ 350,000
65,000
1,010,000
305,000
90,000
720,000
160,000
0
450,000
$3,150,000
5-32
5-49. (continued)
b. Cost estimate using high-low analysis.
Variable cost =
$6,362,255 $5,699,139
432,000 345,000
Fixed
costs
Cases
432,000
345,000
Operating
Costs
$6,362,255
$5,699,139
=
=
$3,069,542
or
Fixed
costs
=
=
5-33
5-49. (continued)
c. Simple regression based on cases:
Regression Statistics
Multiple R
0.98034501
R Square
0.96107634
Standard Error
39850.1391
Observations
12
Coefficients
$3,411,468
$6.70765
Intercept
Cases
Operating costs
=
=
=
Intercept
Cases
Price Index
Operating costs
=
=
=
5-34
5-49. (continued)
e. Recommendation.
The multiple regression appears to improve the fit (compare the adjusted R2s), but
the rationale for the inclusion of the price level as a cost driver is unclear. There is some
possibility that the price index variable is a surrogate for some other factor correlated
with the growth of the business. It might be better to adjust the cost figures to real
(price-level adjusted) and forecast the adjusted operating costs.
Once the simple regression is complete, and it is relatively easy to do, there is no
reason for the high-low estimate, because it ignores most of the information.
Therefore, some combination of the controllers account analysis estimate and the
estimate from the simple regression seems most appropriate.
5-35