Concept explainers
Concept introduction:
Least-square regression- Least square regression method use all the available data to derive the best fitting line which minimizes the sum of squared errors between the data points and the regression line.
Requirement 1
The linear cost equation.
Concept introduction:
Least-square regression- Least square regression method use all the available data to derive the best fitting line which minimizes the sum of squared errors between the data points and the regression line.
Requirement 2
To explain
The components of the cost equation.
Least-square regression- Least square regression method use all the available data to derive the best fitting line which minimizes the sum of squared errors between the data points and the regression line.
Requirement 3
To explain
The difference with the high low method and scatter-graph
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MANAGERIAL ACCOUNTING >C<
- Examine the graphs in Exercise 3-40. Required: As explained in the chapter, cost behavior patterns can be described as fixed, variable, semi-variable, mixed, or step function (i.e., semi-fixed) in nature. Explain the exact type of cost behavior pattern represented by each of the cost curves shown in graphs A through L. Note that some of the graphs might represent a combination of multiple cost behavior patterns.arrow_forwarda) Determine the variable cost per unit and the fixed cost using the high-low method.b) What is the equation of the total mixed cost function?c) Prepare the scatter diagram and insert the trendline or line of best-fit. Use a scaleof 2 cm to represent 1,000 units on the x-axis & 2 cm to represent $50,000 on the yaxis.arrow_forwardDistinguish between ( a ) a variable cost, ( b ) a mixed cost, and ( c ) a step-variable cost. Plot thethree costs on a graph, with activity plotted horizontally and cost plotted verticallyarrow_forward
- Which of the following statements related to cost estimation methods is true ? a . Only high -low method has a slope and an intercept . b. The scatter - graph method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels . c. The most complex method of cost estimation is the high - low method . d. The least -squares regression method is the most accurate and reliable method to determine the cost behavior compared to scatter -graph plot and high -low methods . e. None of the given answersarrow_forwardIf an income statement is prepared as an internal report, under which of the following methods would the term gross margin most likely appear? Question 10 options: a) Both absorption costing and variable costing. b) Absorption costing but not variable costing. c) Variable costing but not absorption costing. d) Neither variable costing nor absorption costingarrow_forwardDistinguish between (a) cost behavior and (b) a mixed cost, and (c) a step-variable cost. Plot the three costs on a graph, with activity plotted horizontally and cost plotted vertically.arrow_forward
- 1) What understanding did Betty have about cost of behavior of these costs? MOH Cost: a) fixed b)Variable c)Mixed Pizza Cost: a) fixed b)Variable c)Mixed 2)What understanding did Mark have about cost of behavior of these costs? MOH Cost: a) fixed b)Variable c)Mixed Pizza Cost: a) fixed b)Variable c)Mixed 3)Recognizing that these were the only two pieces of data they had, which method of cost estimation did they likely use? Betty: a)Accounting Analysis Method b)High Low-Method c)Regression Method Mark: a)Accounting Analysis Method b)High Low-Method c)Regression Methodarrow_forwardCost Relationships The following costs are for Optical View Inc., a contact lens manufacturer: Required Calculate and graph total costs, the total variable cost, and total fixed cost. For each level of output calculate the per-unit total cost, per-unit variable cost, and per-unit fixed cost. Using the results from requirement 2, graph the per-unit total cost, per-unit variable cost, and per-unit fixed cost, and discuss the behavior of the per-unit costs over the given output levels.arrow_forwardWhich of the following statements is true regarding regression analysis? Question 8 options: Regression analysis considers all of the data points for determining the line that best fits the data so it is usually less accurate than the high-low method. Regression analysis helps generate a statistic, called the R-square, which tells how well the line fits the data points. Regression analysis can only be used by manufacturing companies to predict costs. All of the above are true.arrow_forward
- Which of the following statements related to cost ?estimation methods is true .a None of the given answers .b The most complex method of cost .estimation is the high-low method .c The scatter-graph method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels .d The three methods determine a slope and an .intercept .e The high-low method is the most accurate Ox and reliable method to determine the cost behavior compared to scatter-graph plot and least-squares regression methodsarrow_forwardA regression equation is set up, where the dependent variable is total costs and the independent variable is production. A correlation coefficient of 0.70 implies that: The coefficient of determination is negative. The level of production explains 49% of the variation in total costs There is a slightly inverse relationship between production and total costs. A correlation coefficient of 1.30 would produce a regression line with better fit to the data.arrow_forwardMatching Following are a number of key terms and concepts introduced in thechapter, along with a list of corresponding definitions. Match the appropriate letter for the key term or concept to each definition provided (items 1–12). Note thatnot all key terms and concepts will be used. Answers are provided at the end of thischapter.a. Cost–volume–profit analysisb. Cost formulac. Contribution margind. Contribution margin formatincome statemente. Linearity assumptionf. Contribution margin ratiog. Operating leverageh. Sales mixi. Break-even pointj. High–low techniquek. Managerial accountingl. Management processm. Variable costn. Fixed costo. Relevant rangep. Mixed (semivariable) costq. Cost behavior pattern____ 1. The proportion of total sales represented by various products or categoriesof products.____ 2. The difference between revenues and variable costs.____ 3. The concept that operating income changes proportionately more than revenues for any given change in revenues.____ 4. The…arrow_forward
- Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning