Earth and Artistry, Inc., provides commercial landscaping services. Sasha Cairns, the firm's owner, wants to develop cost estimates that she can use to prepare bids on jobs. After analyzing the firm's costs, Cairns has developed the following preliminary cost estimates for each 1,000 square feet of landscaping. Direct material Direct labor (5 direct-labor hours at $10 per hour) Overhead (at $18 per direct-labor hour) Total cost per 1,000 square feet $400 50 90 $540 Cairns is quite certain about the estimates for direct material and direct labor. However, she is not as comfortable with the overhead estimate. The estimate for overhead is based on the overhead costs that were incurred during the past 12 months as presented in the following schedule. The estimate of $18 per direct-labor hour was determined by dividing the total overhead costs for the 12-month period ($648,000) by the total direct-labor hours (36,000). Total Overhead Regular Direct- Labor Hours Overtime Direct Labor Hours" Total Direct- Labor Hours January February $ 54,000 2,910 190 3,100 47,000 2,380 20 2,400 March 48,000 2,210 40 2,250 April 56,000 2,590 210 2,800 May 57,000 3,030 470 3,500 June 65,000 3,240 760 4,000 July 64,000 3,380 620 4,000 August 56,000 3,050 350 3,400 September 53,000 2,760 40 2,800 October 47,000 2,770 30 2,800 November 47,000 2,120 30 2,150 December 54,000 2,560 240 2,800 Total $648,000 33,000 3,000 36,000 *The overtime premium is 50 percent of the direct-labor wage rate. Cairns believes that overhead is affected by total monthly direct-labor hours. Cairns decided to perform a least squares regression of overhead (OH) on total direct labor hours (DLH). The following regression formula was obtained. OH=26,200+ 9.25DLH Required: 1. The overhead rate developed from the least-squares regression is different from Cairns' prelimi- nary estimate of $18 per direct-labor hour. Explain the difference in the two overhead rates. 2. Using the overhead formula that was derived from the least-squares regression, determine a total variable-cost estimate for each 1,000 square feet of landscaping.