The controller of Brokaw Production has collected the following monthly cost data for analyzing the behavior of utility costs.

Instructions

a. Determine the fixed costs and unit variable costs using regression analysis. (We recommend the use of Excel.)

b. Prepare a scatter plot using Excel. Present the cost equation line estimated in part (a).

c. What utility cost does the cost equation estimate for a level of activity of 500 machine hours? By what amount does this differ from March’s observed cost for 500 machine hours?

d. What utility cost does the cost equation estimate for a level of activity of 700 machine hours? By what estimate does this differ from June’s observed cost for 700 machine hours?

Transcribed Image Text:

Total Total Utility Costs $3,200 Machine Hours January February 400 4,700 550 March 4,000 500 April May 2,100 790 3,600 450 June 5,300 700 July August September 5,500 690 5,100 620 7,400 880 October 4,600 610 November 3,000 350 December 6,700 820