Problem 1: Submit to Dropbox in one Word document together with problem 1-8. Assess decision-making approaches to forecasting results using different techniques. Compare results. Problem 2-21 (Essay) Details Bob Jones owns a catering company that stages banquets and parties for both individuals and companies. The business is seasonal, with heavy demand during the summer months and yearend holidays and light demand at other times. Bob has gathered the following cost information from the past year:
month labor hrs overhead costs
January 2500 55000
February 2800 59000
March 3000 60000
April 4200 64000
May 4500 67000
June 5500 71000
July 6500 74000
August 7500 77000
September 7000 75000
October 4500 68000
November 3100 62000
December 6500 73000
Total 57600 805000
Bob recently attended a meeting of the local Chamber of Commerce, at which he heard an accounting professor discuss regression analysis and its business applications. After the meeting, Bob enlisted the professor's assistance in preparing a regression analysis of the overhead data he collected. This analysis yielded an estimated fixed cost of $48,000 per month and a variable cost of $4 per labor hour. Why do these estimates differ from estimates using the high-low method?