Analysis of Mixed Cost—Using Excel Regression Function for Professor Martin Taylor Presented by Wenxiang Lu
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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Analysis ToolPak Installation
• Step 2
• File/Options/Add-Ins
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Analysis ToolPak Installation
• Step 3• File/Options/Add-Ins/Manage• Click “Go”
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Analysis ToolPak Installation
• Step 4:• File/Options/Add-Ins/Manage/Analysis ToolPak
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Analysis ToolPak Installation
• 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
• Regression Method
Y=3,431 + 0.75*X
**Y=Total maintenance cost X= number of patient days
High
Low
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Microsoft Excel Worksheet
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
• Regression Method
Y=30,644.5 + 8.7*X
**Y=Total billing cost X= number of orders
High
Low
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Microsoft Excel Worksheet
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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