The CEO of Central Industries has requested a forecast for next month€™s maintenance costs. Three possible levels of operations and potential cost drivers are as follows (all within the relevant range):

Refer to the information in Exercise 2.41. 

Data are available on the Wiley website at www.wiley.com/go/eldenburgcanada.

Required:

A. If you have not already done so, perform a regression analysis using the most appropriate cost driver for estimating maintenance costs. Write the cost function.

B. Use the cost function from Part A to develop a flexible budget for the three possible levels of operations.

Data from Exercise 2.41:

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Units of output Direct labour hours Machine setups 1,710 330 62 1,350 215 50 2,000 270 70 Material Handling $4,600 4,080 5,000 5,600 5,400 5,120 Total Manufacturing Overhead Costs $41,850 39,380 43,750 46,600 45,650 44,320 Units Maintenance $37,250 35,300 1,150 1,020 1,250 1,400 May January February March 38,750 41,000 40,250 39,200 April 1,350 June 1,280