CHAPTER 3 . MEASUREMENT OF COST BEHAVIOR 109 3-32 Identifying Discretionary and Committed Fixed Costs Identify and compute total discretionary fixed costs and total committed fixed costs from the follow- ing list prepared by the accounting supervisor for Kasay Building Supply: Advertising $21.000 Depreciation 48.000 Health insurance for the company's employees 24,000 Management salaries 87.500 Payment on long-term debt 48,500 Property lax 30,000 Grounds maintenance 7,000 Office remodeling 24.000 Research and development 45.5003-35 Account Analysis Heavenly Computers is a company started by two engineering students to assemble and market personal computers to faculty and students, The company operates out of the garage of one of the students' homes. From the following costs of a recent month, compute the total cost function and total cost for the month: Telephone $ 60, fixed Utilities 250, fixed: 30% attributable to the garage, 70% to the house Advertising 85, fixed Insurance 1 10, fixed Materials 5,500, variable, for five computers Labor 2.150: 51,400 fixed plus $750 for hourly help for assembling five computers114 PART 1 . FOCUS ON DECISION MAKING 3-46 High-Low, Regression Analysis On November 15, 2009, Sandra Cook, a newly hired cost analyst at Peterson Company, was asked to predict overhead costs for the company's operations in 2010, when 530 units are expected to be produced. She collected the following quarterly data: Quarter Production in Units Overhead Costs 73 $ 715 2/06 709 6-40 4/06 133 1,124 1/07 122 995 2/07 125 1.105 122 1.113 WO7 130 1.036 1/08 121 982 2/08 126 1,060 112 990 CHAPTER 3 ANIN 81 81 2/09 119 104 3/09 87 1. Using the high-low method to estimate costs, prepare a prediction of overhead costs for 2010. 2. Sandy ran a regression analysis using the data she collected. The result was Y = $347 + $5.76X Using this cost function, predict overhead costs for 2010. 3, Which prediction do you prefer? Why