Hartford Steel Corporation is developing a cost function for its manufacturing overhead costs. Data for the...

 

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Hartford Steel Corporation is developing a cost function for its manufacturing overhead costs. Data for the past 30 months are given below. Month Overhead Machine Production Number 1 2 3 4 5 6 7 8 9 10 11 2245STESANNK 12 13 14 15 16 17 18 19 20 21 23 24 25 26 27 28 29 30 76667 73678 80141 61985 72685 87675 78450 70634 63417 56057 67446 72102 68533 69079 85550 58197 61626 80689 58256 55337 85108 76485 67783 Hours 1772 1820 1634 1006 1383 1957 1561 1464 67518 73680 66132 1545 1119 1382 1320 1264 1344 1803 1022 1510 1793 1149 1155 1847 1832 1136 56398 1136 66622 1330 63494 1358 89416 1882 1174 1643 1381 Runs 31 22 39 40 39 41 48 34 25 29 35 47 49 29 48 38 21 29 27 22 38 23 42 22 33 26 45 45 31 26 1 Required: (1). Evaluate the possible cost functions using the following criteria, (a) economic plausibility, (b) Goodness-of-fit and (c) individual tests (t tests) for the cost parameters at 95% level of accuracy. Use the following format for the analysis. Criterion Model (1) a) Economic plausibility b) Goodness-of-fit c) Individual t tests for cost parameters **** Model (N) (2). Which model would you recommend and why? (3). For the model with two drivers, predict the overhead cost for 1600 machine hours and 50 production runs. (4). Prepare a 99% confidence interval for the forecast overhead in part (3) above. Hartford Steel Corporation is developing a cost function for its manufacturing overhead costs. Data for the past 30 months are given below. Month Overhead Machine Production Number 1 2 3 4 5 6 7 8 9 10 11 2245STESANNK 12 13 14 15 16 17 18 19 20 21 23 24 25 26 27 28 29 30 76667 73678 80141 61985 72685 87675 78450 70634 63417 56057 67446 72102 68533 69079 85550 58197 61626 80689 58256 55337 85108 76485 67783 Hours 1772 1820 1634 1006 1383 1957 1561 1464 67518 73680 66132 1545 1119 1382 1320 1264 1344 1803 1022 1510 1793 1149 1155 1847 1832 1136 56398 1136 66622 1330 63494 1358 89416 1882 1174 1643 1381 Runs 31 22 39 40 39 41 48 34 25 29 35 47 49 29 48 38 21 29 27 22 38 23 42 22 33 26 45 45 31 26 1 Required: (1). Evaluate the possible cost functions using the following criteria, (a) economic plausibility, (b) Goodness-of-fit and (c) individual tests (t tests) for the cost parameters at 95% level of accuracy. Use the following format for the analysis. Criterion Model (1) a) Economic plausibility b) Goodness-of-fit c) Individual t tests for cost parameters **** Model (N) (2). Which model would you recommend and why? (3). For the model with two drivers, predict the overhead cost for 1600 machine hours and 50 production runs. (4). Prepare a 99% confidence interval for the forecast overhead in part (3) above.

Answer rating: 100% (QA)

1 a Economic Plausibility Model 1 The cost function is of the form Y a bX1 cX2 where Y is the overhead cost X1 is machine hours and X2 is production runs The economic plausibility of this model can be ... View the full answer