A budget is an expression of management's expectations and goals concerning future revenues and costs. To increase their effectiveness, many budgets are flexible, including allowances for the effect of variation in uncontrolled variables. For example, the costs and revenues of many production plants are greatly affected by the number of units produced by the plant during the budget period, and this may be beyond a plant manager's control. Standard cost-accounting procedures can be used to adjust the direct-cost parts of the budget for the level of production, but it is often more difficult to handle overhead. In many cases, statistical methods are used to predict or forecast overhead from the level of production using historical data. As a simple example, consider the historical data for a certain plant. Enter the data into EXCEL and analyze it to answer the following items. Production (in 10,000) units: 5 6 7 8 9 10 11 Overhead costs (in $1,000): 13 11.4 13 16 15.7 15.3 17.1 (a) Construct a scatterplot of y versus x. WebAssign Plot WebAssign Plot WebAssign Plot WebAssign Plot Correct: Your answer is correct. (b) State the model equation. PRODUCTION = β0 + β1OVERHEAD OVERHEAD = β1PRODUCTION OVERHEAD = β0 + β1PRODUCTION PRODUCTION = β1 + β0OVERHEAD OVERHEAD = β1 + β0PRODUCTION PRODUCTION = β1OVERHEAD Correct: Your answer is correct.

For each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the basic assumption, component, or accounting principle that is applied (if you agree) or violated (if you disagree).wagner corporation adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar. spooner oil company changed its method of accounting for oil and gas exploration costs from successful efforts to full cost. no mention of the change was included in the financial statements. the change had a material effect on spooner's financial statements. cypress manufacturing company purchased machinery having a five-year life. the cost of the machinery is being expensed over the life of the machinery. rudeen corporation purchased equipment for $180,000 at a liquidation sale of a competitor. because the equipment was worth $230,000, rudeen valued the equipment in its subsequent balance sheet at $230,000.davis bicycle company received a large order for the sale of 1,000 bicycles at $100 each. the customer paid davis the entire amount of $100,000 on march 15. however, davis did not record any revenue until april 17, the date the bicycles were delivered to the customer. gigantic corporation purchased two small calculators at a cost of $32.00. the cost of the calculators was expensed even though they had a three-year estimated useful life. esquire company provides financial statements to external users every three years.