Question

Following is cost data for the equipment maintenance department. This department charges other departments for the actual cost of materials and labor when making equipment repairs. The managers now want to develop a cost function that explains their overhead costs as a function of the number of service calls made each month.


REQUIRED
A. Estimate the department’s cost function using analysis at the account level.
B. Using the cost function estimated in part (A), estimate the overhead cost for June if 135 service calls are expected.
C. Calculate the average overhead cost per unit for the four-month period. Given this average cost, what is the estimated total cost for June?
D. Which estimation method—the one in part (B) or part (C)—is better?Why?


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  • CreatedJanuary 26, 2015
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