That is the standard approach to cost estimation. Use data to plug into regression and come up with estimates of slope and fixed cost component. Then, using those estimates, plug in a value for x and calculate y or total costs.

b. Prepare a contribution margin income statement for Palermo Company. c. Why do companies use the contribution margin income statement format? 33. Regression Analysis Using Excel (Appendix). Brake Products, Inc, produces brake pads. Management wants to estimate the cost of production equipment used to produce the brake pads. The company reported the following monthly cost data related to production equipment: Jun-Ir $1.1m 54.0010 June M000 36.0.00 Allan-I 1.098.000 57,600 Required: a. Use Excel to perform regression analysis. Provide a printout of the results. b. Use the regression output to develop the cost equationY =f+ vX bylling in the dollar amounts forf and u. c. What would Brake Product's estimated costs be if it used 90,000 machine hours this month? Exercises: Set B