Reference no: EM13502492

On the third day in your role as accountant the general manager has asked you to review the results of 2012 and 2013 to try and determine if there is a relationship between the number of meals prepared per month and the administration costs which she believes to be too high. Data regarding the number of conferences per month, number of meals prepared for that month and the administration costs for the months of 2012 and 2013 are as follows:

Year    Month Number of conferences   Total number of meals prepared       Administrative cost

2012    Jan                  20                                            700                              27800

2012    Feb                  22                                            250                             14000

2012    Mar                  10                                            200                              12000

2012    Apr                  20                                            500                              20000

2012    May                24                                            650                              23800

2012    Jun                   28                                          450                               18400

2012    Jul                    16                                            650                             20400

2012    Aug                14                                            150                              8200

2012    Sep                 24                                            350                             18800

2012    Oct                  24                                            600                             22200

2012    Nov                16                                             300                              16600

2012    Dec                 32                                           750                              32200

2013    Jan                  18                                            850                             41500

2013    Feb                 19                                            175                              19000

2013    Mar                 12                                            100                             17800

2013    Apr                 18                                            775                              35500

2013    Jun                  24                                            475                             27400

2013    Jul                   16                                            775                             30400

2013    Aug                14                                            25                               12100

2013    Sep                  23                                           325                             28000

2013    Oct                 21                                           700                             33100

2013    Nov                 16                                            250                              24700

2013    Dec                 26                                            925                              48100

 

Required:

a)         Draw a scatter diagram of Boutique Catering's Number of meals prepared and administrative costs for the year.

b)         The relevant range has been identified as between 200 and 800 meals prepared. Mark the range on the scatter graph. Do you think this is an appropriate range? Why?

c)         The high-low method in another way of estimating the cost behavior of Boutique Catering. Using administration costs and number of meals prepared within the relevant range create an equation to express the results.

d)         A third method that can help understand the cost behavior relationship is by using regression analysis. Construct an excel spreadsheet and use regression analysis to estimate the;

a. Number of meals and administration cost. What is the administration costs' equation when 600 meals are prepared?

b. Number of meals, administration costs and number of conferences. What is the administration cost when 600 meals are prepared?

e)         From the methods used which method would you feel most confident to report the findings to the General Manager? In your answer make particular reference to the advantages and disadvantages of each method and in addition discuss the cost-benefit of each method.