Bricol Confectionary manufactures candied treats for hotels in a highly automated assembly plant in Edmonton, Alberta. Their automated system is in its first year of operation, and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operations the following data were collected:

Observation Machine-hours Kilowatt-hours Total Overhead Costs

January 1,880 2,260,000 $116,000

February 1,825 2,170,000 114,000

March 1,900 2,250,000 115,000

April 1,650 2,145,000 114,000

May 1,625 2,100,000 105,000

June 1,500 2,060,000 100,000

Required (5 marks)

a) Using the high-low method, determine the cost estimating equation with machine-hours as the predictor variable. (2 marks)

b) Using the high-low method, determine the cost estimating equation with kilowatt-hours as the predictor variable. (2 marks)

c) For July the company ran the machines for 1,600 hours and used 2,075,000 kilowatt hours of power. The overhead costs totaled $95,000. Which driver was the best predictor for July? Explain why you chose the predictor you did. (2 marks)