Clothes for U Is a Large Merchandiser of Apparel for Budget-Minded

question 56

Essay

Clothes for U is a large merchandiser of apparel for budget-minded families.Management recently became concerned about the amount of inventory carrying costs and transportation costs between warehouses and retail outlets.As a starting point in further analyses, Gregory Gonzales, the controller, wants to test different forecasting methods and then use the best one to forecast quarterly expenses for 2019.The relevant data for the previous three years follows: The results of a simple regression analysis using all 12 data points yielded an intercept of $11,854.55 and a coefficient for the independent variable of $126.22 (R-squared = 0.19, t = 1.5, SE = 974).
Required:
(1) Determine the quarterly forecasts for 2019 using the high-low method and also regression analysis. Recommend which method Gregory should use and explain why.
(2) How does your analysis in requirement 1 change if Clothes for U is involved in global sourcing of products for its stores?

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Definitions:

Optimum Standards

Ideal benchmarks set for performance, quality, or efficiency that are considered best under the given conditions.

Attainable Standards

Realistic targets for costs or productivity set by management, which are challenging yet achievable under normal working conditions.

Materials Quantity Variance

The deviation of the actual materials used from the expected standard quantity in production, times the standard unit cost.

Controllable Overhead Variances

The differences between the budgeted and actual overhead costs that management can control or influence.