Case 2-25 (continued)
3. The number of workdays should be used as the activity base rather than
the number of units produced. There are several reasons for this. First,
the scattergraphs reveal that there is a much stronger relationship (i.e.,
workdays and since the janitorial labor costs are driven by the number
of workdays, it
appears
on the scattergraph that the number of units
drives the janitorial labor costs to some extent. Analysts must be careful
© 2014 by McGraw-Hill Education. All rights reserved.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Appendix 2A 47
Exercise 2A-1 (20 minutes)
1.
Month
Rental
Returns
(X)
Car Wash Costs
(Y)
January ……….
2,310
$10,113
February ……..
2,453
$12,691
March …………
2,641
$10,905
April……………
2,874
$12,949
May ……………
3,540
$15,334
June …………..
4,861
$21,455
July ……………
5,432
$21,270
August ………..
5,268
$19,930
September …..
4,628
$21,860
October ………
3,720
$18,383
November ……
2,106
$9,830
December ……
2,495
$11,081
Intercept (fixed cost) …………….
Slope (variable cost per unit) ….
return or:
Y = $2,296 + $3.74X
