common to many vehicles is highly automated, so all labor is considered part of factory overhead. The plant manager, who has just been promoted, would like to understand how overhead costs fluctuate in order to improve planning and budgets. After discussions with both financial and operations members of the plant staff, there is general agreement that the best cost driver for overhead is machine$-$hours. Goulburn, Incorporated produces parts for heavy equipment used in mining and construction. The plant that produces one part

common to many vehicles is highly automated, so all labor is considered part of factory overhead. The plant manager, who has just

been promoted, would like to understand how overhead costs fluctuate in order to improve planning and budgets. After discussions

with both financial and operations members of the plant staff, there is general agreement that the best cost driver for overhead is

machine$-$hours.

Monthly data were collected from the most recent two years on machine$-$hours and overhead. More months of data were available, but

a process change had taken place about $30$ months earlier, so the staff believed any data from before that time would be misleading.

The data are shown in the following table:

Monthly data were collected from the most recent two years on machine$-$hours and overhead. More months of data were available, but a process change had taken place about $30$ months earlier, so the staff believed any data from before that time would be misleading. The data are shown in the following table:

Month Machine$-$Hours Factory Overhead

$139,300$ $ $527,100$

$237,300416,500$

$330,100365,800$

$442,400498,200$

$550,600590,700$

$645,500503,400$

$742,400476,900$

$862,100702,400$

$936,300425,300$

$1053,700661,000$

$1152,700616,700$

$1236,300490,500$

$1359,900693,000$

$1458,900654,700$

$1545,500580,000$

$1639,300527,900$

$1755,800683,400$

$1850,600613,700$

$1960,900669,500$

$2049,600619,100$

$2153,700672,100$

$2229,100445,000$

$2359,900692,400$

$2458,900718,500$

Required:

Use the high$-$low estimation method to estimate the overhead cost behavior $($fixed and variable components of cost$)$ for the Goulburn plant.

Prepare a scattergraph showing the overhead costs plotted against the machine$-$hours.

Use a spreadsheet program to compute regression coefficients to describe the overhead cost equation.

Use the results of your regression analysis to develop an estimate of overhead costs assuming $48,000$ machine$-$hours will be worked next month.