InStay would like to predict their total monthly overhead cost based on machine hours (DLH) used. Data
Question:
InStay would like to predict their total monthly overhead cost based on machine hours (DLH) used. Data for the last 24 months is below.
Required:
1. Use this data to prepare cost formulas using
a) the high-low method
b) regression analysis.
Show the cost formula from each calculation in the form:
Overhead = Fixed cost + MH*(Variable OH per unit)
2. Assume that InStay decides to use the cost formula from the regression analysis. Briefly explain in your own words how the company will make use of the formula.
MH | OH |
129,088 | 2,300,451 |
106,612 | 1,878,012 |
105,028 | 1,829,452 |
129,107 | 2,313,372 |
110,759 | 1,813,767 |
124,427 | 2,186,002 |
102,049 | 1,707,997 |
131,238 | 2,197,812 |
101,943 | 1,787,236 |
133,884 | 2,228,998 |
101,270 | 1,791,169 |
134,175 | 2,367,479 |
113,797 | 1,917,197 |
101,508 | 1,837,012 |
130,316 | 2,239,440 |
101,532 | 1,783,849 |
93,878 | 1,578,677 |
123,525 | 2,168,136 |
127,824 | 2,193,289 |
104,205 | 1,750,702 |
102,958 | 1,830,086 |
134,706 | 2,394,475 |
116,636 | 2,063,260 |
97,906 | 1,690,091 |
Expert Answer:
Answer 1a highlow mthod MH OH 129088 2300451 OH at high level activity 2394475 106612 1878012 OH at ... View the full answer
