The Smith Firm did a simple regression analysis where: Total Overhead = A + (B x DL Hrs) The results of the analysis are below:

Variable Coefficient Standard Error t-Value Constant $80,000 3,335.34 2.14 # DL Hrs $ 42 8.02 5.08 r2 = 0.72

Using the regression results, what will total overhead costs be if DL Hrs next month are 5,200 hours? (Try this and then click on Feedback to see the answer)

b. Refer to the information about Smith Firm above. What information leads you to believe that the regression results should be relied on?

c. Write the linear cost function equation using Y for estimated costs and X for the activity of the cost driver for the following: Machine operating costs include $400,000 of machine depreciation per year, plus $150 of utility costs for each day the machinery is in operation.