...

; .

vaioz at Meres, located in Grenchen, Switzerland, makes prestige high-end custom

in small lots. One of the company's products, a platinum diving watch, goes through an
; process. The company has observed etching costs (expressed in Swiss Francs, SFr) as fol; over the last six weeks:

Total
Etching Cost

Week
1.
2
3........
4
5
6

4
3
8
6
7
_2

SFf18
17
25
] ' - ' : 20
24
16
SR120

30

For planning purposes, management would like to know the amount of variable etching cost
- unit and the total fixed etching cost per week.
Required:
I
Using the least-squaresregressionmethod, estimate die variable and fixed elements of etching
cost
Express die cost data in (1) above in the form Y = a + bX.
If die company processes five units next week, what would be the expected total etching cost?
EXERCISE 3-7 High-Low W**k ScattMgropii AnafrwflLQZ,103]
The Mowing datereferringto urate shipped andratal^jjangespei^e have been assembled by
Company, a wholesaler of Large, custom-hoik air-conditioning units for commercial buildings:

Month
January
February
.
March
April
....

July

Units
Shipped

Total Shipping
Expense

3
6
4
5
7
8
2

$1,800
$2,300
$1,700
$2,000
$2,300
$2,700
$1,200

Required:
1. Using the high-low method, estimate a cost formula for shipping expense.
2. The president of the company has no confidence in the high-low method and would like you
to check your results using a scattergraph.
a. %epare a scattergraph, using the data given above. Plot cost on the vertical axis and activity on the horizontal axis. Use a ruler to fit a straight line to your plotted points.
b. Using your scattergraph, estimate the approximate variable cost per unit shipped and the
approximate fixed cost per month with the quick-and-dirty method.
3. What factors, other than the number of units shipped, are likely to affect the company's total
shipping expense? Explain.

,tions.
hases of raw materials
'
root materials included in manufacturing overhead
labor

;;'' _ _ o
nufacturing overhead applied to work in process
derappiiedoverhead

materials
k in process
tshed goods

\ \ \ \

m&X>

$35000

fttpare a schedule of cost of goods manufactured for the month.

Prepare a schedule of cost of goods sold for the montn.

$30,000
$5,000
$58,000
$87,000
$4,000

$65,000
$42,000

WSffl&T'