Market Thyme, a cooperative of organic family-owned farms, has recently started a fresh produce club to provide support to the group's member farms and to pro- mote the benefits of eating organic, locally produced food. Families pay a seasonal membership fee of $100 picked seasonal local produce to several neighborhood distribution points. Five hundred families joined the club for the first season, but the number of orders varied from week to week. Tom Diehl has run the produce club for the first season. Tom is now a farmer but remembers a few things about cost analysis from college. In planning for next year, he wants to know how many orders will be needed each week for the club to break even, but first he must estimate the club's fixed and variable costs. He has collected the following data over the club's first season of operation: Number of Orders per Week 415 Week Weekly Total Costs $26,900 27,200 24,700 25,200 27,995 25,900 27,000 28,315 26,425 25,750 435 3 285 4 325 450 360 420 8. 460 380 10 350
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Tom uses his computer to calculate the following regression formula:
Weekly total costs = $18,791 + ($19.97 * Number of orders per week) Draw the regression line on your graph. Use your graph to evaluate the regression line using the criteria of economic plausibility, goodness of fit, and significance of the independent variable. Is the cost function estimated using the high-low method a close approximation of the cost function estimated using the regression method? Explain briefly.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
