Therefore, the regression equation for the staff costs vs. Sales becomes
If the sales increases by 1 million then the model predict the staff, cost will increase by 14.942497 million. The line of best fit indicates a positive linear relationship between the staff cost and sales. The convergence of the points towards the mean further shows little variation in the various factors/variables that determines the staff cost in the company. There is little erroneous data indicated by a single outlier at the upper right corner of the chart. The coefficient of determination further a test to a god fit to the data at 0.85.This aspect implies that the relationship can explain 85% of the variation in staff cost to sales.
Fuel costs vs. Sales
Slope=2.55
Intercept=-2.82
R-Squared=0.96
Regression model therefore y=-2.82 +2.55x
This equation implies that for every 1 million increase in sales the model predicts a 2.55 million increase in the fuel cost. The scatter plots of the relationship between fuel cost and sales suggest a positive linear relationship between the two variables. This aspect shows that that it is possible to predict the cost of fuel cost in the company accurately based on the sales made. The pattern of the cost is determined by how close or far they converge towards the mean. In this case, most of the points converge towards the left bottom corner of the chart, indicating the possibility that the variables that determine the cost of the fuel are similar in nature. The coefficient of determination in this case equals to 0.96, which means that approximately 96%of the variation in fuel cost can be explained by the relationship to sales. This aspect would, therefore, be considered a good fit to the given data in the sense that it would improve the ability to use sales to predict fuel cost in the company.
Warranty/Refund costs vs. Sales
Slope =-0.359
Intercept=82.910
R. Square=0.00092
Y=82.910-0.359x. This equation indicates that a decline in sales of 1million will result in an approximate drop in cost by 0.359 million. The scatter plot shows a slight /weak negative relationship between the two variables. The coefficient of determination at 0.00092 further indicates that the relationship of sales cannot explain the variation in Warranty cost. This could be an effect of erroneous data on the variables
Warranty/Refund costs vs. Sales (exclude outlier)
Slope=2.8042553
Intercept=46.2636
R.Squared=0.51172
Y=46.2636+2.804.In this case the scatter plots indicate a positive linear relationship between the two variables. This aspect is because an increase of 1million in sales results in a subsequent increase of 2.8M in cost. Another aspect contributing to this change is the omission of outliers, which, therefore, indicate that a perfect data was used, and no error, therefore, occurred. There is an improved variation from 0.00 to 0.51 showing that 51% of the variation in Warranty cost can now be explained by the relationship of sales.
Summary
Different factors can influence the behavior of cost as per the various charts. In the case of staff, cost factors such as overtime payments, holiday leaves and sick leaves can affect the overall variation in the cost of payment made to an individual within a company. The cost of fuel used depends mainly on different factors such as distance covered and the model of vehicle being used. This factor influences the overall variation in the cost of fuel used hence the convergence o the plots towards the mean.
Assumptions
In the process of the analysis, certain assumptions were included. The first assumption made was that. There is linearity with the variables meaning that the variable of the response indicates a linear combination of the regression coefficient and the predictor variables. Another assumption included is that the variance used is constant meaning different response variable contains a similar type of variation in the errors, regardless of the dependent variable
What is the role of management accountant and why/how does it add value to an organization like Cornucopia plc?
Role of Management accounting in an organization
The primary purpose of management accounting in an organization is to support the competitive decision-making through, processing, collecting and communicating information that aids management in planning controlling and evaluating business processes and company strategy (Lambert, Sponem, 2012). One interesting aspect of management accounting is that is rare to come about an individual within a company that has the Management accountant title. Many individuals within an organization often function as accountants. The individual operates as cost accountants, tax accountant’s internal auditors or financial accountants. In the company like Cornucopia, the divisions have a top accountant called controller who oversee much of the management accounting done in this division. Therefore, the management accounting process is the process of using and creating quality, cost, and time –based information to make effective decisions within the organization. Various people play this role within Cornucopia Company. The internal Audit department ensures controls are followed and efficient operations. Financial Accounting provides information to outsiders such as creditors and investors and at the same time provide relevant financial reports to the decision makers within the organization. The system professional process information so that it is available to management in formats that is useful for decision-making (Loo, Swagerman, 2011). The tax departments ensure organizations complies with the tax laws and pays no more than it is obligated to pay. The tax department also participates in good planning evaluation and control of decisions and processes that will affect the future tax -expense exposure.
The cost accounting plays the role of tracking and reporting relevant product and service cost. In overall, the controller works to accumulate all the information as an integral part of the controlling, planning, evaluating, and decision-making activities that take place throughout the organization (Zimmerman, Yahya, 2011). The management accountants must, therefore, continue to provide a quality analysis for problem solving by being familiar with all the functions of the organization. They must ensure they add value to the company through the council often-important decision, which include strategy development and deployment. Giving support of accounting broader company’s use of accounting information through the design and installation of reliable information system is also essential. In addition, the management accountants must develop information systems and provide increasingly relevant and timely data. An ever-increasing number of people within the organization at the same time must be trained to use the accounting information’s successfully.
Why is management accounting subject to bandwagon effect, as described by Jones and Dugdale
In the process of determining the development of management accounting theories and their relationship various activity-based costing, process were identified by Jones and Dugdale, and branded as ABC. This system was influenced by the critique of the existing accounting systems which undermined production. The three problem areas identified include inadequacy of the traditional system, the use of ROI measures and dominance of the financial accounting mentality in enterprise (Jones and Dugdale). The innovative activity –based costing was discovered in the process of moving to the future. This entails the discussion of process control to emphasize the need for clearly defined cost centers and identification measures. The activity-based costing system enabled managers to measure cost right and make the right decision so that ABC is the key to future costs. The activity-based costing acquired the acronym of ABC that placed it in line with other management accounting techniques. The primary role of ABC was to supply managers with the required information including the crucially strategic cost management information (Jones and Dugdale). This was in line with improving the purposes of cost system of inventory valuation, operational control and individual product cost measurement. The ABC framework argued that the cost system for external reporting did not give the company managers the needed resources for measuring performance and product cost purposes. This makes management accounting subject to the bandwagon effect.
References
Jones, T., & Dugdale, D. (n.d.). The ABC bandwagon and the juggernaut of modernity. Accounting, Organizations and Society, 121-163.
Lambert, C., & Sponem, S. (2012). Roles, authority and involvement of the management accounting function: a multiple case-study perspective. European Accounting Review, 21(3), 565-589.
Loo, I. D., Verstegen, B., & Swagerman, D. (2011). Understanding the roles of management accountants. European Business Review, 23(3), 287-313.
Zimmerman, J. L., & Yahya-Zadeh, M. (2011). Accounting for decision making and control. Issues in Accounting Education, 26(1), 258-259.
