On November 15, 2012, Sandra Cook, a newly hired cost analyst at Demgren Company, was asked to predict overhead costs for the company’s operations in 2013, when 500 units are expected to be produced. She collected the following quarterly data:

1. Using the high-low method to estimate costs, prepare a prediction of overhead costs for 2013.

2. Sandra ran a regression analysis using the data she collected. The result was:

Y=$337+$5.75X

Using this cost function, predict costs for 2013.

3. Which prediction do you prefer? Why?

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Quarter Production in Units Overhead Costs $ 721 1/2009 76 2/2009 79 715 3/2009 72 655 4/2009 136 1,131 1,001 1/2010 125 2/2010 128 1,111 3/2010 125 1,119 4/2010 133 1,042 1/2011 124 997 2/2011 129 1,066 3/2011 115 996 4/2011 84 957 835 1/2012 84 2/2012 122 1,050 3/2012 90 991