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ABC Company wants to estimate its indirect manufacturing costs. It is considering using either one of two different cost drivers, units produced and machine hours.

ABC Company wants to estimate its indirect manufacturing costs. It is considering using either one of two different cost drivers, units produced and machine hours. ABC gathered information for 4 weeks of data.

Use this data to

  1. calculate the cost equation using linear regression method with units as the cost driver, and
  2. estimate the indirect manufacturing costs if it expects to produce 210 more units than they did in Week 4.

The data follows. For the regression, you may solve for the equation any way you choose. Remember we did Excel formulas, graphing and the regression in Analysis Toolpak.

Week Units Machine Hours Indirect Manufacturing Costs
1 4,000 1,630 240,900
2 4,050 1,614 237,750
3 4,100 1,614 238,800
4 4,200 1,611 239,050

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