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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Check out a sample textbook solutionChapter 5 Solutions
Managerial Accounting
- Using the data in E4-2 and spreadsheet software, determine: The variable cost per unit, the total fixed cost, and R2. The plotted data points using the graphing function. Compare the results to your solutions in E4-2 and E4-3 and explain the reasons for the results.arrow_forwardSearch about how different techniques are efficient to estimate cost. – Engineered estimate of cost– Analysis at the account level– Regression analysisarrow_forwardWhich of the following statements is true? Select one: O a. The most complex of the cost estimation methods is the high-low method. O b. Engineering approach approximates cost function by classifying each account as either variable or fixed based on the analyst's knowledge of how the account behaves. C The high-low method of deriving an estimated cost line uses all the data points available. O d. In approximating the cost function, the account analysis classifies costs based upon an industrial engineer's evaluation of production methods, and material, labor, and overhead requirements. O e. The high-low 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.arrow_forward
- Reviewing cost behaviour patterns over time from the accounting records and using that review to predict future costs best describes: O Regression analysis O Scatter plots O Analysis at the account level O Two-point methodsarrow_forwardWhich of the following is one of the two approaches used to analyze data in the decision to keep or discontinue a segment? A. comparing contribution margins and fixed costs B. comparing contribution margins and variable costs C. comparing gross margin and variable costs D. comparing total contribution margin under each alternativearrow_forwardIn the cost equation TC = F + VX, “V” is best described as the: Multiple Choice intercept of the cost equation. total costs that do not vary with changes in the activity level. activity level used to estimate the dependent variable. slope of the cost equation.arrow_forward
- Please answer me quickely!arrow_forward“All the independent variables in a cost function estimated with regression analysis are cost drivers.” Do you agree? Explain.arrow_forward6.) Statement 1. The high-low method needs three observations of costs to calculate the cost formula.Statement 2. The least-squares regression method uses all of the available data to find the best fitting line.Statement 3. The calculations in the least-squares regression method is always accurate in all data sets between any kind of activity and cost. Which of the following is true?Group of answer choices Statement 1 Statement 3Statements 1 and 3Statements 1 and 2 Statements 2 and 3 Statement 2 7.) Which of the following statements is true about broker markets?Group of answer choices Brokers’ extensive contacts provide them with a pool of price information that individual investors could easily duplicate themselves, and hence not really value adding. Investors have an incentive to hire a broker because what they charge as a commission is less than the cost of direct search. Brokers can guarantee an order because they have an inventory of securities. Brokers bring buyers and sellers…arrow_forward
- A total cost equation can be used to predict future costs for various activity levels. Write the total cost equation. 4. In the total cost equation: a) What is the slope? b) What is the independent variable? c) What is the dependent variable?arrow_forwardCOSTING METHOD. 1. What is average cost method? 2. What is FIFO cost method?arrow_forwardExplain why cost predictions based on the same cost driver can differ when applying the high-low method and regression analysis. State one advantage and one disadvantage of the high-low method.arrow_forward
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