Bailey Nickles, managing director of the

WinnipegConsultingGroup, is examining how overhead costs behave with changes in monthly professional labour-hours billed to clients. Assume the following historical data:

Total	Professional Labour-Hours
Overhead Costs	Billed to Clients
	$360,000			2,000
	420,000			3,000
	455,000			4,000
	497,000			5,000
	535,000			5,500
	607,000			6,500

Compute the linear cost function, relating total overhead cost to professional labour-hours, using the representative observations of 3,000 and 5,500 hours. Plot the linear cost function. Does the constant component of the cost function represent the fixed overhead costs of the

WinnipegConsultingGroup?

Why?

Select the labels for the cost function using the representative observations of 3,000

and 5,500 hours.

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