Analysis of Mixed Cost— Using Excel Regression Function for Professor Martin Taylor Presented by...

Analysis of Mixed Cost—Using Excel Regression

Functionfor

Professor Martin Taylor

Presented by Wenxiang Lu

Excel Setup: Analysis ToolPak Installation

• Analysis Toolpak is NOT pre-installed with Excel 2010 or 2013• We need to install and load it before we can use the statistical

functions.• Mainly four steps to install Analysis ToolPak.• File/Options/Add-Ins/Manage/Analysis ToolPak

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Analysis ToolPak Installation

• Step 1

• File/Options

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• Step 2

• File/Options/Add-Ins

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• Step 3• File/Options/Add-Ins/Manage• Click “Go”

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• Step 4:• File/Options/Add-Ins/Manage/Analysis ToolPak

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• The “Data Analysis” button is added to the Analysis group under Data tab.

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Review: High-Low• Total mixed cost = Total fixed cost + total variable cost Y = a + b* X

Where, Y = Total mixed cost a = Total fixed cost b = Variable cost per unit = = X = the level of activity

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Review: Regression• Statistical technique for estimating the relationship between the independent variable(s) and the dependent variable.• Two basic types:

Simple regression: Y = a + bX + ε Multiple regression: Y = a + b1X1

+ b2X2 + B3X3 + ... + BtXt + ε

• Where, Y = dependent variable (the variable that we are trying to predict)X = independent variable (the variable that we are using to predict Y)a = intercept b = slope ε = error term.

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MonthUnits

(Meals) Total CostJanuary 1280 $6,720 February 1810 $7,260March 1620 $7,270April 2830 $11,060May 3630 $12,580June 2610 $8,660July 2460 $8,580August 2640 $9,550September 3620 $13,050October 2840 $11,060November 1820 $7,320December 1650 $7,370January 1260 $6,790February 1850 $7,480March 1710 $6,990April 2940 $11,400

Regression Data 1

• High-Low Method

Y= 3,723 + 2.44*X

• Regression Method

Y= 2,618.7 + 2.8*X

**Y=Total cost X= number of meals

High

Low

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Microsoft Excel Worksheet

Patient

DaysMaintenance

Costs

Month X Y

January 5600 $7,900

February 7100 $8,500

March 5000 $7,400

April 6500 $8,200

May 7300 $9,100

June 8000 $9,800

July 6200 $7,800

Regression Data 2

• High-Low Method

Y=3,400 + 0.8*X


Y=3,431 + 0.75*X

**Y=Total maintenance cost X= number of patient days

High

Low

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Number of Orders

Billing Costs in $

1500 420001900 460001000 370001300 430002800 540001700 470002100 510001100 420002000 480002400 530002300 49000

Regression Data 3

• High-Low Method

Y=27,560 + 9.44*X


Y=30,644.5 + 8.7*X

**Y=Total billing cost X= number of orders

High

Low

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Summary: High-Low vs. Regression• Total mixed cost = Total fixed cost + total variable cost Y = a + b* X

Where, Y = Total mixed cost a = Total fixed cost (the vertical intercept of the regression line) b = Variable cost per unit = (the slope of the regression line) X = the level of activity

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Which method is more accurate?

• High-Low

• Regression ˅

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THANK YOU!

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Analysis of Mixed Cost— Using Excel Regression Function for Professor Martin Taylor Presented by...

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