estimated and controlled if the fixed and variable components of each overhead activity are known. One such activity is receiving raw materials (unloading incoming goods, counting goods, and inspecting goods), which she believes is driven by the number of receiving orders. Ten months of data have been gathered for the receiving activity and are as follows: Month Receiving Orders Receiving
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Method of Least Squares, Predicting Cost for Different Time Periods from the One Used to Develop a Cost Formula
Farnsworth Company has gathered data on its
| Month | Receiving Orders | Receiving Cost | |||
| 1 | 1,000 | $18,000 | |||
| 2 | 700 | $15,000 | |||
| 3 | 1,500 | $28,000 | |||
| 4 | 1,200 | $17,000 | |||
| 5 | 1,300 | $25,000 | |||
| 6 | 1,100 | $21,000 | |||
| 7 | 1,600 | $29,000 | |||
| 8 | 1,400 | $24,000 | |||
| 9 | 1,700 | $27,000 | |||
| 10 | 900 | $16,000 |
Assume that Tracy has used the method of least squares on the receiving data and has gotten the following results:
| Intercept | 3,212 |
| Slope | 15.15 |
Required:
2. Using the cost formula, what is the predicted cost of receiving for a month in which 1,450 receiving orders are processed? (Note: Round your answer to the nearest dollar.)
$____________________
3. Prepare a cost formula for the receiving activity for a quarter. Based on this formula, what is the predicted cost of receiving for a quarter in which 4,650 receiving orders are anticipated? Round your answer to the nearest dollar.
$____________________
Prepare a cost formula for the receiving activity for a year. Based on this formula, what is the predicted cost of receiving for a year in which 18,000 receiving orders are anticipated? Round your answer to the nearest dollar.
$____________________
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