Compare least squares regression and the scattergraph method of analyzing mixed
costs.
What should a company consider when pooling indirect costs?
Explain the difference between horizontal analysis and vertical analysis of a company’s
financial statements.
What is operating leverage, and how does a company achieve operating leverage?
Eastern Company currently produces a component that it uses in making some of its
products. The company has calculated the following costs for making the part:
Eastern is considering outsourcing the component. A supplier has offered to sell the
component to Eastern for $55 each. Eastern needs 10,000 units each year. If Eastern
does outsource the component, it can use the facilities to make another product that
would yield contribution margin of $60,000 per year.Required:1) Should Eastern
outsource the component? Support your answer with appropriate computations.
2) What qualitative factors should be considered in this decision?
