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Enlightening manufactures lightbulbs. The factory manager has provided last year's direct machine hours and overhead costs: Direct Overhead Costs Month Machine Hours (from Last Year)
Enlightening manufactures lightbulbs. The factory manager has provided last year's direct machine hours and overhead costs: Direct Overhead Costs Month Machine Hours (from Last Year) 2,700 $109,000 2,400 $116,400 3,100 $123,100 3,700 $147,000 $130,600 5,700 $189,000 6,200 $213,000 7,100 $237,400 6,900 $240,000 4,400 $137,500 4,800 $137,500 5,900 $155,700 56,800 $1,936,200 3,900 Required: Show all your workings for full marks. Round answers to two decimal places. (a) Using the high-low method, calculate the variable cost per hour and total fixed costs for overhead costs. (3 marks) (b) Explain one similarity and one difference between the two-point method and the high- low method. (2 marks) (c) Explain one main reason why Regression results are considered better than the high-low method. (2 marks) (d) Explain what the R square, F-value and P-values shown below tell you about these Regression results. (3 marks) Regression Statistics Multiple R 0.92239425 R Square 0.85081114 Observations 12 ANOVA df SS MS 1 20374212818 20374212818 10 3572597182 357259718.2 11 23946810000 F 57.02913532 Significance F 1.94403E-05 Regression Residual Total Intercept X Variable 1 Coefficients Standard Errort Stat 35599.6536 17522.94465 2.031602239 26.5669746 3.517982762 7.551763723 p-value 0.069617948 1.94403E-05 (e) Write the monthly total cost functions for the high-low method and Regression results (provided above). (2 marks) (f) Calculate the estimated annual overhead costs for each method using last year's machine hours and your total cost functions from part (e). (2 marks)
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