Estimating fixed and variable cost using the regression method Ray Rogers, the production manager of Martin Construction Components, is trying to figure out the cost behavior of his factory supplies cost. The company uses machine hours as the cost driver. Victor Hoover, the assistant manager, collected the following cost data for the last 32 weeks: 

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Required

a. The company uses the number of machine hours as the cost driver for factory supplies costs. Use an algebraic equation to describe how total factory supplies costs can be estimated.

b. Use a spreadsheet program to perform a regression analysis. Use factory supplies costs as the dependent variable (Y) and the machine hours as the independent variable (X). Determine the total fixed cost per week and variable cost per machine hour.

c. Identify the R 2 statistic provided by the Excel program and explain what it means.

d. Identify a potential weakness of regression analysis and explain what can be done to minimize it.

e. Determine the estimated total cost of factory supplies, if machine hour usage amounts to 100 hours for the next week. What portion of the total cost is fixed and what portion is variable? 

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Supplies Costs Machine Supplies Costs Machine Week No. Hours Week No. Hours $3,856 4,279 5,633 5,298 6,721 2,448 3,528 2,837 1,359 3,296 3,472 3,264 3,925 4,002 4,583 3,523 $3,819 3,610 3,916 2,915 4,327 2,214 2,106 2,390 2,107 4,868 5,021 4,811 3,580 2,800 2,269 2,748 1 86 17 64 2 72 18 79 62 19 20 129 137 4. 91 21 144 42 22 37 37 33 23 24 56 49 8. 23 25 12 10 96 26 57 11 12 94 91 27 28 54 65 13 72 29 77 14 60 30 15 16 48 53 31 32 92 82