Garfield Company manufactures a popular brand of dog repellant known as DogGone

Question

Garfield Company manufactures a popular brand of dog repellant known as DogGone It, which it sells in gallon-size bottles with a spray attachment. The majority of Garfield’s business comes from orders placed by homeowners who are trying to keep neighborhood dogs out of their yards. Garfield’s operating information for the first six months of the year follows:

Required:
3. Using the high-low method, calculate Garfield’s total fixed operating costs and variable operating cost per bottle. (Do not round your intermediate calculations. Round your variable cost per unit answer to 2 decimal places and fixed cost answer to the nearest whole number.)



4. Perform a least-squares regression analysis on Garfield’s data. (Use Microsoft Excel or a statistical package to find the coefficients using least-squares regression. Round your answers to 3 decimal places.)

5. Determine how well this regression analysis explains the data. (Round you regression statistics to three decimal places and your percentage answer to the nearest whole number.)

6. Using the regression output, create a linear cost equation (y = a + bx) for estimating Garfield’s operating costs. (Round your answers to 3 decimal places.)

Month Number of Bottles Sold Operating Cost January 1,000 $ 10,520 February 1,470 15,680 March 1,770 16,070 April 2,420 19,790 May 3,390 27,690 June 3,640 34,600

Explanation / Answer

Variable Cost per Unit

Variable cost per unit (b) is calculated using the following formula:

Where,
y2 is the total cost at highest level of activity;
y1 is the total cost at lowest level of activity;
x2 are the number of units/labor hours etc. at highest level of activity; and
x1 are the number of units/labor hours etc. at lowest level of activity

therefore varible cost per unit=(34600-10520)/(3640-1000)=9.121

Total fixed cost=34600-(9.3181*3640)=682.116

cost volume formula=y=1398.7878

THEREFORE Y=1398.7878+9.121X

4)THE COEFFICIENTS OF LEAST SQAURE ESTIMATE S are as follows.

8.131912787

6

Variable Cost per Unit = y2 y1/x2 x1

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