The Following Data Were Obtained from the Books of Thomas

question 88

Essay

The following data were obtained from the books of Thomas Company:
$$\begin{array} { | c | c | c | } \hline \text { Manth } & \text { Overhead Costs } & \begin{array} { c } \text { Direct Labour } \\\text { Hours }\end{array} \\\hline 1 & \$ 14 & 3 \\\hline 2 & 18 & 5 \\\hline 3 & 25 & 7 \\\hline 4 & 12 & 4 \\\hline 5 & 26 & \mathbf { 8 } \\\hline 6 & \mathbf { 8 } & 2 \\\hline\end{array}$$ The normal equations are
$\begin{array} { l } \boldsymbol { \Sigma X Y } = a\Sigma X + b \Sigma X ^ { 2 } \\\Sigma Y = a n + b \Sigma X\end{array}$ Use a computer or calculator to prepare the following:
a.Plot the data for overhead cost as a function of direct labour hours using the scatterplot method.
b.Compute the fixed and variable components of the overhead costs using the high-low method.
c.Compute the fixed and variable components of the overhead costs using the least-squares method.
d.Discuss the strengths and weaknesses of the three different cost estimation techniques used in parts a,b,and

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Definitions:

Journal Entry

A basic record documenting a business transaction in an accounting system, used to transfer information to financial statements.

Bank Balance

The amount of money held in a bank account at a particular time, as recorded by the bank.

NSF Check

Stands for Non-Sufficient Funds Check, a check that cannot be processed due to insufficient funds in the account it was drawn on.

Adjusting Entry

Journal entries made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.