Amber Foster Products, Inc., a discount store, has gathered data on its overhead activities and associated costs for the past 12 months. Amber Foster, a member of the CFO’s office, believes that overhead activities and costs should be classified into groups that have the same driver. Amber has decided that unloading incoming goods, counting goods, and inspecting goods can be grouped together as a more general receiving activity, since these three activities are all driven by the number of purchase orders. The following 12 months of data have been gathered for the receiving activity

Month: Purchase Orders & Receiving Cost

Month: Purchase Orders & Receiving Cost

1: 1,423 $25,693

2: 2,456 $36,455

3: 1,044 $21,070

4: 2,323 $35,090

5: 1,975 $20,596

6: 1,290 $25,696

7: 1,238 $25,400

8: 2,110 $29,562

9: 2,557 $38,956

10: 2,780 $40,125

11: 1,943 $31,000

12: 2,855 $50,632

14. Using the high-low method, what is the cost formula for the receiving function?

Observations 5

ANOVA
	df	SS	MS	F	Significance F
Regression	1	1620	1620	21.13043	0.019348927
Residual	3	230	76.6667
Total	4	1850

	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%
Intercept	68.0	8.17743055	8.315570472	0.003644	41.97577	94.0242
Xi	-3.00	0.65263001	-4.59678527	0.019349	-5.07696	-0.92304

15. Using the provided summary output (that used the method of least squares), what is the cost formula for the receiving activity? _________________

16. Using the cost formula you derived in question 15, how much would the total predicted cost be with 1,750 purchase orders?_________________

17. The standard error of the regression is 770.498. Using this information, your answer to items 15 and 16, and Exhibit 3.14 below, what is the 95% confidence interval for the 1,750 purchase order estimate?

Table Selected Values: t Distribution*
Degrees of Freedom	90%	95%	99%
1	6.314	12.708	63.657
2	2.92	4.303	9.925
3	2.353	3.182	5.841
4	2.132	2.776	4.604
5	2.015	2.571	4.032
6	1.943	2.447	3.707
7	1.895	2.365	3.499
8	1.86	2.306	3.355
9	1.833	2.262	3.25
10	1.812	2.228	3.169
11	1.796	2.201	3.106
12	1.782	2.179	3.055
13	1.771	2.16	3.055
14	1.761	2.145	3.012
15	1.753	2.131	2.947
16	1.746	2.12	2.921
17	1.746	2.11	2.898
18	1.734	2.101	2.878
19	1.729	2.093	2.861
20	1.725	2.086	2.845
30	1.697	2.042	2.75
00**	1.645	1.96	2.576

Answer rating: 100% (QA)

Answer 14 Using the HighLow Method the cost formula for the receiving function can be determined using the following formula Cost Formula Fixed Cost Variable Cost Purchase Orders Using this formula th... View the full answer