During your examination of the 1980 financial statements of MacKenzie Park Co., which manufactures and sells trivets, you wish to analyze selected aspects of the company’s operations.

Labor hours and production costs for the last four months of 1980, which you believe are representative for the year, were as follows:

Based upon the information above and using the least squares method of computation, select the best answer for each of the following questions:

a. The cost function derived by the least squares method:
(i) Would be linear.
(ii) Would have a negative slope.
(iii) Would be parabolic.
(iv) Would indicate maximum costs at the point of the function’s point of inflection.

b. Monthly production costs could be expressed by (i) Y = aX + b (ii) Y= a + bX (iii) Y = b + aX (iv) Y = (a + bX)

c. Using the least squares method of computation, the fixed monthly production cost of trivets is approximately:
(i) \($10,000\) (ii) \($9,500\) (iii) \($7,500\) (iv) \($5,000\) 

d. Using the least squares method of computation, the variable production cost per labor hour is:
(i) \($6.00\) (ii) \($5.00\) (iii) \($3.00\) (iv) \($2.00\)

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Total Month September 2,500 October 3,500 Labor hours production costs $ 20,000 25,000 November 4,500 30,000 December 3,500 25,000 14,000 $100,000