5 Cuni Culara would like to predict their total monthly overhead cost based on machine hours (MH) used Data for the last 24 months is in the spreadsheet Required 1 Use this data to prepare cost formulas using a) the high low method, and b) regression analysis Show the cost formula from each calculation in the form Overhead Fixed cost MH (Variable OH per unit) Assume that Cuni Culara decides to use the cost formula from the regression analysis Briefly explain in your own words how using this predictive formula might mislead the company over the next year MH OH 77 556 3 811 831 55 835 2 742 355 74 011 3 627 327 60 342 2 973 515 72 348 3 538 300 52 519 2 554 344 62 554 3 076 075 50 422 2 478 032 67 607 3 310 581 72 819 3 570 210 65 339 3 189 233 51 683 2 526 338 79 036 3 871 993 78 467 3 829 670 52 648 2 596 049 63 542 3 099 981 53 123 2 609 753 57 904 2 847 298 59 053 2 900 800 51 531 2 525 621 75 862 3 722 942 71 115 3 503 175 59 379 2 889 574 51 971 2 537 898

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Question: 5. Cuni Culara would like to predict their total monthly overhead cost based on machine hours (MH) used. Data for the last 24 months is

5. Cuni Culara would like to predict their total monthly overhead cost based on machine hours (MH) used. Data for the last 24 months is in the spreadsheet.

Required:

1. Use this data to prepare cost formulas using a) the high-low method, and b) regression analysis. Show the cost formula from each calculation in the form:

Overhead = Fixed cost + MH*(Variable OH per unit)

Assume that Cuni Culara decides to use the cost formula from the regression analysis. Briefly explain in your own words how using this predictive formula might mislead the company over the next year.

MH	OH
77.556	3.811.831
55.835	2.742.355
74.011	3.627.327
60.342	2.973.515
72.348	3.538.300
52.519	2.554.344
62.554	3.076.075
50.422	2.478.032
67.607	3.310.581
72.819	3.570.210
65.339	3.189.233
51.683	2.526.338
79.036	3.871.993
78.467	3.829.670
52.648	2.596.049
63.542	3.099.981
53.123	2.609.753
57.904	2.847.298
59.053	2.900.800
51.531	2.525.621
75.862	3.722.942
71.115	3.503.175
59.379	2.889.574
51.971	2.537.898

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