Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 33

Cost Estimation; High-Low Method; Regression Analysis; Spreadsheet Application Lexon, Inc., is a large manufacturer of affordable DVD players. Management recently became aware of rising costs resulting from returns of malfunctioning products. As a starting point for further analysis, Paige Jennings, the controller, wants to test different forecasting methods and then use the best one to forecast quarterly expenses for 2013. The relevant quarterly data for the previous three years follow:

The result of a simple regression analysis using all 12 data points yielded an intercept of $11,855 and a coefficient for the independent variable of $126.22. ( R -squared = 0.44, SE = $975).
Required
1. Calculate the quarterly forecast for 2013 using the high-low method and regression analyses. Recommend which method Paige should use and explain why.
2. How does your analysis in requirement 1 change if Lexon manufactures its products in multiple global production facilities to serve the global market