Managerial Accounting Essay Example | Topics and Well Written Essays - 750 words - 4

Managerial Accounting - Essay Example From these, the variable cost per unit is obtainable. The graph shows that the distribution of machine hours whose correlation with total costs incurred yields the least of effects on the total costs comparing all the variables involved. The correlation between machine hours and total cost is 0.2 whose relationship is less positive (Duchac, Reeve and Warren 754). Considering the relationship between total costs of production and the direct labor hours, the relationship is more positive. Interpreting this shows that there is a highly positive relationship between the two variables. The correlation coefficient here stands at 0.72, which is the highest. It reveals that a change in the number of direct labor hours will have great effect on the total costs of the manufacturing process. Duchac, Reeve and Warren (754) suggest that due to this, reduction of labor hours will yield a reduction in total cost of production that may yield higher profits. The third variable looks at the relationship between the total numbers of units produced in relation to the total costs incurred. The relationship is positive and correlation gives a 0.67 result. It shows that the total cost increase would yield an increase in the level of units produced. According to Duchac, Reeve and Warren (754), the relationship here shows the least positive of correlation. The relationship relates with the relevant range widely based on the period taken. Relative range represents the range within which a given price or cost holds true. The least square method is advantageous in that it includes all the data observed and tries to identify the line of best fit. The line helps to determine the variable and fixed cost proportion. The disadvantage of this method lies in its complication of the process because it considers all the observations presented. Under regression analysis, the following formula is vital. This aims at