On November 15, 2006, Sandra Pery, a newly hired cost analyst at Demgren Company, was asked to predict overhead costs for the company’s operations in 2007, when 500 units are expected to be produced. She collected the following quarterly data:

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QUARTER PRODUCTION IN UNITS OVERHEAD COSTS 1/2003 76 $ 721 2/2003 79 715 3/2003 72 655 4/2003 136 1,131 1/2004 125 1,001 2/2004 128 1,111 3/2004 125 1,119 4/2004 133 1,042 1/2005 124 997 2/2005 129 1,066 3/2005 115 996 4/2005 84 957 1/2006 84 835 2/2006 122 1,050 3/2006 90 991 1. Using the high-low method to estimate costs, prepare a prediction of overhead costs for 2007. 2. Sandra ran a regression analysis using the data she collected. The result was: Y = $337+ $5.75X Using this cost function, predict costs for 2007. 3. Which prediction do you prefer? Why?