Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 40

Regressions from Published Data

Obtain 13 years of data from the published financial statements of a company. You will be able to find the data on the Internet. Also, Moody’s, Standard&Poor’s, and Value-Line are good sources of financial data. Using the first 12 years of data, perform a regression analysis in which the dependent variable is cost of goods sold and the independent variable is revenue (some companies call it sales).

Required

a. Use the results from the regression on the first 12 years of data to estimate the cost of goods sold for year 13. How far off was your estimate of cost of goods sold for year 13?

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b. Prepare a report that describes your work and discusses reasons why your estimate of cost of goods sold is different than the actual cost of goods sold for year 13.

Step 1 of 2

a.?Answers will vary. The degree to which estimates based on the first twelve months of data are “close” will depend, in part, on the variability of the data, seasonal (monthly) patterns, and so on.