Caledonian Cartons Plc Case Study Solution

I-INTRODUCTION

Managerial accountants are expected to make different accounting techniques and methods useful in order to make appropriate decisions while treating the most suitable information.

Most companies define their tasks as one of creating goods and services. These latter, consider that defining, controlling and predicting costs, essential just like the production process. One of the captious procedure in the decision-making process is cost estimation that needs to be acquired for each decision.

To make the best decisions, accountant must have a clear vision about how certain costs and their behavior at different levels of the process (production/ operation). The efficiency of this step is to measure the interrelation

The problem statement: Based on the importance of cost estimation and behaviour to the company performance, our report treat the case of Caledonian Cartons PLC, which is a company, specialized in the production of cartons for the smaller independent milk processors. Caledonian Cartons PLC company reveals its past cost data related to overhead for the purpose of building a model using the most suitable accounting estimation method in order to predict overhead costs, understand their sensitivity and to set an effective pricing policy.

The purpose of this study is to construct the most appropriate and best model to estimate overhead costs based on the techniques and the variables provided and needed. First section: Methodology

In this part, the method chosen for the research will be justified, we will state the reasons behind this prime of regression as the best technique for cost estimation.

The dependent and independent variables will be identified and described also

II. Methodology :

1. Research methodology:

Accounting techniques for estimations and predictions are various and numerous. Each method stands for a different specific situation.

We will be using the regression method because it gives the most accurate estimate of the relationship between the dependent variable and the independent variables. It uses all available data points as opposed to the high-low method, which the accountants can use by involving the periods of the highest and lowest activity levels in order to set the variable percentage of overhead and fixed costs but it ignores all other observations and relies on the extreme factors for example which relies only on two data points and may therefore miss some information contained in the other data points.

Identification and Description of: The dependent The independent variables

We identify two types sets of variables which can be classified as dependent variables and independent