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

Required

a. The company uses the number of professional hours as the cost driver for factory supplies costs.
Use an algebraic equation to describe how total office support 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 professional hour.

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