QuestionBraunhaus Microbrewery is in the process of analyzing its manufacturing overhead costs. Braunhaus Microbrewery is not sure if the number of cases or the number of processing hours is the best cost driver of manufacturing overhead (MOH) costs. The following information is available (Use attached table)
1. Are the manufacturing overhead costs fixed, variable or mixed? Explain
2. Graph Braunhaus Microbrewery’s manufacturing overhead costs against processing hours.
3. Graph Braunhaus Microbrewery’s manufacturing overheads costs against cases produced.
4. Does the data appear to be sound, or do you see any potential data problems? Explain.
5. Use the high low method to determine Braunhaus Microbrewery’s manufacturing overhead cost equation using processing hours as the cost driver. Assume that management believes all of the data to be accurate and wants to include all of it in the analysis.
6. Estimate manufacturing overhead costs if Braunhaus Microbrewery incurs 550 processing hours in July, using the results of the high-low analysis in requirement 5.
7. Use excel regression analysis to determine Braunhaus Microbrewery’s manufacturing overhead cost equation using number of cases produced as the cost driver. Use all of the data provided. Project total manufacturing overhead costs if Braunhaus Microbrewery incurs 550 processing hours in July.
8. Use Excel regression analysis to determine Braunhaus Microbrewery’s manufacturing overhead cost equation using number of cases produced as the cost driver. Use all of the data provided. Project total manufacturing overhead costs if Braunhaus Microbrewery produces 6,000 cases. Which cost equation is better – this one or the one from requirement 7? Why?
9. Use excel regression analysis to determine Braunhaus Microbrewery’s manufacturing overhead cost equation using number of cases produced as the cost driver. This time, remove any potential outliers before performing the regression. How does this affect the R-square? Project total manufacturing overhead costs if Braunhaus Microbrewery produces 6,000 cases.
10. In which cost equation do you have the most confidence? Why?