(Scattergraph; high low; least squares) Shamus Ltd. is analyzing its overhead costs and wants to use direct labor hours as the predictor. The following 18 weeks of information is to be used in developing an overhead cost formula for the company:

a. Plot the data on a scattergraph and visually fit a linear cost formula.

b. Compute the cost formula using the high-low method.

c. Compute the cost formula using the least squares method.

d. Compare the cost formulas developed in parts

a, b, and c.

e. How much of the variance in overhead is explained by the number of direct labor hours?

f. Is there a significant relationship between direct labor hours and overhead cost? Explain the rationale for your answer.LO1

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WEEK DLHS COST WEEK DLHS COST WEEK DLHS COST 1 4,100 $12,000 7 6,550 $13,500 13 5,400 $12,800 2 4,300 12,750 8 6,750 14,000 1+ 5,650 13,750 3 4,500 13,250 9 7,100 14,000 15 5,800 14,125 + 4,875 12,750 10 4,700 13,125 16 6,000 14,250 5 5,600 13,125 11 5,050 12,500 17 6,850 14,300 6 6,325 13,750 12 5,275 12,300 18 7,050 14,200