Months Total Overhead Regular Direct$-$ Labor Hours Overtime Direct$-$ Labor Hours$*$Footnote asterisk Total Direct$-$ Labor Hours

January $ $47,0003,0801703,250$

February $54,0003,220403,260$

March $53,0003,160403,200$

April $60,0002,9502003,150$

May $58,0003,5004703,970$

June $52,0003,0507603,810$

July $58,0002,9306703,600$

August $56,0003,2603203,580$

September $47,0002,640602,700$

October $49,0003,230303,260$

November $47,0003,360403,400$

December $59,0002,6102102,820$

Total $ $640,00036,9903,01040,000$

$*$Footnote asteriskThe overtime premium is $50$ percent of the direct$-$labor wage rate.

Cairns believes that overhead is affected by total monthly direct$-$labor hours. Cairns decided to perform a least$-$squares regression of overhead $($OH$)$ on total direct$-$labor hours $($DLH$).$ The following regression formula was obtained.

OH $=$ $$43,270+$ $$3\mathrm{.}02$ DLH

Required:

$2.$ Using the overhead formula that was derived from the least$-$squares regression, determine a total variable$-$cost estimate for each $1,000$ square feet of landscaping.

$3.$ Cairns has been asked to submit a bid on a landscaping project for the city government consisting of $54,000$ square feet. Cairns estimates that $60$ percent of the direct$-$labor hours required for the project will be on overtime. Calculate the incremental costs that should be included in any bid that Cairns would submit on this project. Use the overhead formula derived from the least$-$squares regression.

$5.$ After attending a seminar on activity$-$based costing, Cairns decided to further analyze the company$$s activities and costs. Cairns discovered that a more accurate portrayal of the firm$$s cost behavior could be achieved by dividing overhead into three separate pools, each with its own cost driver. Separate regression equations were estimated for each of the cost pools, with the following results.

OH$1=$ $$10,300+$ $$3\mathrm{.}50$ DLH

$,$

where DLH denotes direct$-$labor hours

OH$2=$ $$9,300+$ $$12\mathrm{.}20$ SFS

$,$

where SFS denotes the number of square feet of turf seeded $($in thousands$)$

OH$3=$ $$8,400+$ $$6\mathrm{.}90$ PL

$,$

where PL denotes the number of individual plantings $($e$.$g$.,$ trees and shrubs$)$

Assume that $5$ direct$-$labor hours will be needed to landscape each $1,000$ square feet, regardless of the specific planting material used.

Suppose the landscaping project for the city will involve seeding all $54,000$ square feet of turf and planting $80$ trees and shrubs. Calculate the incremental variable overhead cost that Cairns should include in the bid.

Recompute the incremental variable overhead cost for the city$$s landscaping project assuming half of the $54,000-$square$-$foot landscaping area will be seeded and there will be $240$ individual plantings. The plantings will cover the entire $54,000-$square$-$foot area.