The Hereford Plant produces a single part used in airplane hydraulic systems. The plant manager has...

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The Hereford Plant produces a single part used in airplane hydraulic systems. The plant manager has asked the plant controller to determine the monthly volume that would result in the plant meeting its monthly operating profit goal. Operating profits at the plant are calculated as revenue less direct costs (material and labor) less overhead (both fixed and variable). The monthly profit goal is $78,000 before taxes. The plant sells the part for $205 per unit. Direct costs are $102 per unit. Using the high-low approach, an analyst in the controller's office has estimated overhead costs at $24,440 per month for fixed overhead costs and $80 per unit for variable overhead costs. One of the other cost analysts decided to run a simple regression and based on that reported that, "a better cost estimation equation was" Monthly overhead = $65,420 + $72 per unit The analyst reported that the R² was about 66% and that the estimated coefficient for the intercept was "not significant." The data the controller's office used for both analyses follow: Month LE34FE7B9GHE 6 10 11 12 Units Produced 4,150 4,490 4,660 5,700 4,610 5,430 4,210 5,550 4,710 4,410 5,770 5,640 Overhead Costs $ 356,440 375,160 380,570 480, 240 394,280 446,150 352,860 454,450 502,620 370,790 486,040 456,450 The company controller is surprised that the cost estimates are so different and would like to reconcile this before reporting back to the plant manager. Perform a regression analysis in Excel to determine the regression coefficients for the data using high-low method. Intercept Unit per cost Coefficients The Hereford Plant produces a single part used in airplane hydraulic systems. The plant manager has asked the plant controller to determine the monthly volume that would result in the plant meeting its monthly operating profit goal. Operating profits at the plant are calculated as revenue less direct costs (material and labor) less overhead (both fixed and variable). The monthly profit goal is $78,000 before taxes. The plant sells the part for $205 per unit. Direct costs are $102 per unit. Using the high-low approach, an analyst in the controller's office has estimated overhead costs at $24,440 per month for fixed overhead costs and $80 per unit for variable overhead costs. One of the other cost analysts decided to run a simple regression and based on that reported that, "a better cost estimation equation was" Monthly overhead = $65,420 + $72 per unit The analyst reported that the R² was about 66% and that the estimated coefficient for the intercept was "not significant." The data the controller's office used for both analyses follow: Month LE34FE7B9GHE 6 10 11 12 Units Produced 4,150 4,490 4,660 5,700 4,610 5,430 4,210 5,550 4,710 4,410 5,770 5,640 Overhead Costs $ 356,440 375,160 380,570 480, 240 394,280 446,150 352,860 454,450 502,620 370,790 486,040 456,450 The company controller is surprised that the cost estimates are so different and would like to reconcile this before reporting back to the plant manager. Perform a regression analysis in Excel to determine the regression coefficients for the data using high-low method. Intercept Unit per cost Coefficients

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Reconciliation of Cost Estimates The controller should evaluate the data to determine which cost est... View the full answer