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Unformatted text preview: Demonstration Problem of the High/Low method, Scattergraph, Simple Regression, and Multiple Regression Use the following data to prepare a cost formula using the different methods of analysis for cost behavior. Month Receiving cost 1 1000 300000 18000 2 700 250000 15000 3 1500 450000 28000 4 1200 320000 17000 5 1300 440000 25000 6 1100 280000 18000 7 1600 550000 30000 8 1400 390000 24000 9 1700 230000 21000 10 900 230000 15000 Number of receiving orders Pounds of material delivered Demonstration Problem of the High/Low method using # of Receiving orders as the independent variable Month Receiving cost 1 1000 300000 18000 2 700 250000 15000 3 1500 450000 28000 4 1200 320000 17000 5 1300 440000 25000 6 1100 280000 18000 7 1600 550000 30000 8 1400 390000 24000 9 1700 230000 21000 10 900 230000 15000 High/low method using # of receiving orders as the independent variable(X) Variable cost 6 Move your cursor over the cell to read my inserted comments, which are shown by the red triangle in the right corner. Fixed cost 10800 Cost formula Y=10,800+6X Number of receiving orders Pounds of material delivered Usage of the high/low point only uses 2 points, therefore, it will not be as accurate as the regression analysis since it takes into account all points. The variable cost is determined by finding the slope of the line of the 2 points. Take the change in cost over the change in cost at the highest and lowest points. Fixed cost can be determined after you have calculated the variable cost, since total cost variable cost will give you fixed costs. This is the estimation of receiving costs using the high/low method and using number of receiving orders as the independent variable (X). Demonstration of output using Simple Regression analysis with receiving orders as the independent variable...
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 Summer '11
 JamesStephens
 Financial Accounting

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