Exercise $3\mathrm{.}21$ Multiple Regression

Sweet Dreams Bakery was started five years ago by Della Fontera who was known for her

breads, sweet rolls, and personalized cakes. Della had kept her accounting system simple, believ$-$

ing that she had a good intuitive handle on costs. She had been using the following formula to

describe her monthly overhead costs:

$"$ Overhead cost $"=$$$7,800+$$$7\mathrm{.}50"($direct labor hours$)"$

For breads and sweet rolls that were available in the bakery case each day, she applied a

standard pricing system. For special orders, however, Della needed her cost formula to help her

come up with an estimated cost for the personalized cake or wedding cake. To that cost, she

applied a markup percentage.

Lately, however, the increase in the variety of orders and the elaborateness of the wedding

cakes made her wonder if a more sophisticated view of costs would help her in planning, budget$-$

ing, and pricing.

After some late$-$night discussions with her workers, Della determined that Sweet Dreams'

expansion into wedding cakes and gift baskets had made special orders a more complex oper$-$

ation. The various shapes of the wedding cake tiers had required Della's investing in differ$-$

ent$-$sized cake pans, as well as decorating tips for icing. The different icing patterns and

elaborate designs took much more time for icing, as well. In addition, while a five$-$year$-$old's

birthday cake just requires that the child's name and $($possibly$)$ the superhero's name are