WD Inc. is developing a regression cost equation for the indirect costs in its plant. WD manufactures windows and doors used in home construction;

both products are made in standard and custom sizes. Occasionally, a very large order substantially increases the direct and indirect costs in a given month.

The indirect costs primarily consist of supplies, quality control and testing, overtime, and other indirect labor. Regression is used to budget indirect costs for the coming year,

primarily for cash management purposes. The management accountant, knows from prior years that both direct labor hours and machine hours in the plant

are good independent variables for estimating indirect costs.