The Hard Rock Mining Company is developing cost formulas for management planning and decision-making purposes. The companys cost analyst has concluded that utilities cost is a mixed cost, and he is attempting to find a base with which the cost might be closely correlated. The controller has suggested that tons mined might be a good base to use in developing a cost formula. The production superintendent disagrees; she thinks that direct labor-hours would be a better base. The cost analyst has decided to try both bases and has assembled the following information:

Quarter	Tons Mined	Direct Labor-Hours		Utilities Cost
Year 1:
First	35,000	7,000	$	70,000
Second	22,000	5,000	$	65,000
Third	40,000	6,000	$	80,000
Fourth	32,000	8,000	$	95,000
Year 2:
First	38,000	16,800	$	120,000
Second	45,000	15,800	$	125,000
Third	50,000	14,800	$	105,000
Fourth	48,000	17,800	$	140,000

Required:
1(a).	Using tons mined as the independent variable, prepare a scattergraph that plots tons mined on the horizontal axis and utilities cost on the vertical axis.

Instructions:
1.	On the graph below, use the point tool (Year 1-1st quarter) to plot tons mined on the horizontal axis and utilities cost on the Vertical axis.
2.	Repeat the same process for the plotter tools (Year 1-2nd quarter to Year 2-4th quarter).
3.	To enter exact coordinates, click on the point and enter the values of x and y.
4.	To remove a point from the graph, click on the point and select delete option.

1(b).	Determine a cost formula for utilities cost using least-squares regression. Express this cost formula in the form Y = a + bX. (Round the Variable cost per unit to 2 decimal places, and Fixed Cost to the nearest dollar.)

2(a).	Using direct labor-hours as the independent variable, prepare a scattergraph that plots direct labor-hours on the horizontal axis and utilities cost on the vertical axis.

Instructions:
1.	On the graph below, use the point tool (Year 1-1st quarter) to plot direct labor-hours on the horizontal axis and utilities cost on the Vertical axis.
2.	Repeat the same process for the plotter tools (Year 1-2nd quarter to Year 2-4th quarter).
3.	To enter exact coordinates, double click on the point and enter the values of x and y.
4.	To remove a point from the graph, click on the point and select delete option.

2(b).	Determine a cost formula for utilities cost using least-squares regression. Express this cost formula in the form Y = a + bX. (Round the Variable cost to 2 decimal places, and Fixed Cost to the nearest dollar.)

3.

Would you recommend that the company use tons mined or direct labor-hours as a base for planning utilities cost?

	Tons mined
	Direct labor-hours