The Management of Buff Sports Stadium Believes That the Number

question 9

Essay

The management of Buff Sports Stadium believes that the number of sporting events each month is an measure of activity for total clean-up cost.Shown below are event figures and total clean up costs for the past four months:
Required:
a.Estimate Buff's cost formula for monthly clean-up cost using the high-low method.
b.Estimate Buff's cost formula for monthly clean-up cost using the least-squares regression method.
$\begin{array}{lcc}&\text { Number of } & \text { Total } \\&\text { Sporting } & \text { Clean-up }\\&\text { Events } & \text { Cost }\\ \text { July ........... } & 28 & \$ 30,900 \\\text { August ........ } & 34 & \$ 34,200 \\\text { September..... } & 16 & \$ 20,700 \\\text { October......... } & 22 & \$ 28,200\end{array}$

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Definitions:

Lower-Of-Cost-Or-Market Basis

An accounting principle where inventory is recorded at either its historical cost or market value, whichever is lower, to ensure conservatism.

Conservatism

An accounting principle that requires potential expenses and liabilities to be recognized immediately, but revenue only when it is ensured.

Accounting Concept

Fundamental principles or theories that underpin the practice and procedure of accounting.

Manufacturing Business

This type of business produces goods from raw materials through a combination of manual labor and machines.