4 5 M N B 9 10 11 12 13 14 15 16 17 18 19 20 21 22 P6-6B. Least Squares Regression Analysis The management of Digger Inc., is trying to develop a cost formula for its major manufacturing overhead activities. Digger's manufacturing process is highly au- tomated and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed. The costs must be separated into their fixed and variable components so that the cost behavior of the power usage activity can be better understood. Analysts have determined that machine hours drive power usage, thus machine hours are the cost driver for power costs. Nine months of data have been collected and are presented in the chart below: Period January February March April May June July August September Machine Hours Power Cost 38,000 $ 45,000 45,000 $ 60,300 54,000 $ 67,500 39,600 $ 53,064 37,800 S 47,250 32,400 $ 43,416 43,200 $ 54,000 50,400 S 67,536 46,800 $ 58,500 + A B D H M N b. Use the method of least squares in Excel or a similar computer program to estimate a power cost formula 36 37 23 39 45 41 4 4 49 50 51 52 53 54 55 56 Evaluate from requirement h. Are machine hours a good predictor of power costs? the elect since of any is powered the price by some other activity. A common rule thumbs that dependent de dependent corporis paned by machines, with Arute of the dependent should promote pendenti since of power cobrachiopom other soul of dependent DY 68 69 70 71 d. Using the cost formula from requirement b, estimate power costs when 55,800 machine hours are used. 72 Cost Formula: Estimate of power costs: 73 74 75 76 77 78