Cycle Accessories manufacturers cellphone holders that can be mounted on the handle bars of most motorcycles. The manufacturing process is highly automated and management feels that machine-hours are likely the main driver of overhead costs. Data from the most recent year are shown below.

Required:
1. Using least-squares regression, estimate the fixed cost and variable cost elements of monthly overhead costs. Estimate the fixed cost element to the nearest dollar and the variable cost element to the nearest cent.
2. If the company expects to use 3,000 machine-hours next month, estimate total overhead costs.
3. If the company receives a special order that will require 8,000 machine-hours next month, would you be confident using the estimates from part (I) to predict overhead costs? Why or why not?

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Month January February March April May June July August September October November December Machine-Hours 1.500 1.560 1,800 2.520 2,700 3.300 3,900 4,500 4,200 2,700 1,860 3.900 Overhead Costs $48.400 47.620 52,800 56,320 58,960 62,480 65,120 67,750 66,000 59,840 54,560 64,240