Reference no: EM131692394

High-Low, Scattergraph, and Regression Analysis; Service Company. Hernandez Accounting Company prepares tax returns for individuals. Marie Hernandez, the owner, would like an accurate estimate of the company's costs for planning and decision-making purposes. When Marie asks you to devise a way to estimate costs on a monthly basis, you recall the importance of breaking costs into fixed and variable components. Because the company's costs are driven primarily by the number of tax returns prepared, you decide to use historical data for costs and tax returns prepared:

Required:
a): Use the four steps of the high-low method to estimate total fixed costs per month and the variable cost per tax return prepared. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v.

b): Use the five steps of the scattergraph method to estimate total fixed costs per month and the variable cost per tax return prepared. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v.

c): Use the regression output given to develop the cost equation Y = f + vX by filling in the dollar amounts for f and v.

d): Use the results of the high-low method (a), scattergraph method (b), and regression analysis (c) to estimate costs for 330 tax returns. (You will have three different answers-one for each method.) Which approach do you think is most accurate, and why?

e:) Marie likes the regression analysis approach and asks you to estimate costs for 900 tax returns using this approach (she plans to expand by opening another office and hiring additional employees). Calculate your estimate, and explain why your estimate might be misleading.