Following is cost data for the equipment maintenance department. This department charges other departments for the actual cost of materials and labor when making equipment repairs. The managers now want to develop a cost function that explains their overhead costs as a function of the number of service calls made each month.

REQUIRED

A. Estimate the department’s cost function using analysis at the account level.

B. Using the cost function estimated in part (A), estimate the overhead cost for June if 135 service calls are expected.

C. Calculate the average overhead cost per unit for the four-month period. Given this average cost, what is the estimated total cost for June?

D. Which estimation method—the one in part (B) or part (C)—is better?Why?

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February March April May Salary-Manager $3,000 $3,000 $3,000 $3,200 Supplies Insurance Electricity Property Tax Repair Manuals Total 470 200 59 578 200 61 735 250 65 600 80 650 250 62 90 100 90 $3,819 $3,939 $4,730 $4,252 Service calls 90 110 140 125