Comprehensive Problems - Variance Analysis  - Sweet Treats Ltd Case Study - Accounting and Finance Assignment Help

Assignment Task :

QUESTION 1: Variance Analysisb 
The information in the table below pertains to Sweet Treats Ltd for the month of June. Overhead is allocated on the basis of direct labour hours.

Required:
Calculate the price and efficiency variances for materials and labour and the total direct labour variance for June. Use F or U to indicate whether the variances are favourable or unfavourable.

QUESTION 2: Regression analysis 

You are the management accountant of the Sainsbury College, and are required to use regression analysis to estimate the cost function of asset repairs and maintenance for the College. You identify two possible cost drivers for the asset repairs and maintenance cost: number of maintenance hours and number of students. 

Based on the past ten semesters’ data, you first regress the asset repairs and maintenance cost on number of maintenance hours and the adjusted R-square is 70%, and then you regress the asset repairs and maintenance cost on number of students and the adjusted R-square is 31%. You also know that multiple cost drivers can be added into one regression model, and regress the cost of asset repairs and maintenance on both cost drivers. The regression output is as follows:

Required:

1. If only one cost driver is used, which cost driver, number of maintenance hours or number of students, is a better predictor and why? 

Number of maintenance hours is a better cost driver because the R-square is higher (70% compared to 31%)

1. Create a cost function for each of the cost drivers. Using the appropriate cost function based on your answer above, predict the cost of asset repairs and maintenance if the number of maintenance hours is predicted to be 200 and number of students is predicted to be 350 in the next semester.

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