Reference no: EM132561097
The controller of Stone Product Corporation has asked for help in the selection of the appropriate activity measure to be used in estimating variable supplies expense for the company's budget.
The following information about past expense and two potential activity measures has been supplied:
Month Supplies Exp. Labor hours Machine hours
January $1,500 3,900 2,100
February 1,400 4,200 2,000
March 1,600 4,200 2,100
April 1,550 3,950 2,000
May 1,450 3,800 1,950
June 1,450 3,900 2,000
July 1,500 4,200 2,050
August 1,550 4,300 2,100
September 1,650 4,250 2,400
October 1,550 4,300 2,300
Total $ 15,200 41,000 21,000
Required:
Question 1. Compute the coefficient of correlation, r, and the coefficient of determination, r2 between supplies expense and each of the two activity measure.
Question 2. Which of the two activity measures above should be used as a basis upon which to estimate the allowable supplies expense?
Question 3. Using the activity measure selected in requirement (2) above, determine the fixed expense and the variable expense rate by the method of least squares.
Question 4. Using the activity measure selected in requirement (2) above, determine the fixed expense and the variable expense rate by the method of High and Low point