Hartford Steel Corporation is developing a cost function for its manufacturing overhead costs. Data for the past 30 months are given below.

Month Number Overhead Machine Hours Production Runs

1 76667 1772 31

2 73678 1820 22

3 80141 1634 39

4 61985 1006 40

5 72685 1383 39

6 87675 1957 41

7 78450 1561 48

8 70634 1464 34

9 63417 1545 25

10 56057 1119 29

11 67446 1382 35

12 72102 1320 47

13 68533 1264 49

14 69079 1344 29

15 85550 1803 48

16 58197 1022 38

17 61626 1510 21

18 80689 1793 29

19 58256 1149 27

20 55337 1155 22

21 85108 1847 38

22 76485 1832 23

23 67783 1136 42

24 56398 1136 22

25 66622 1330 33

26 63494 1358 26

27 89416 1882 45

28 67518 1174 45

29 73680 1643 31

30 66132 1381 26

Required: (1). Evaluate the possible cost functions using the following criteria, (a) economic plausibility, (b) Goodness-of-fit and (c) individual tests (t tests) for the cost parameters at 95% level of accuracy. Use the following format for the analysis. Criterion Model (1) . Model (N) a) Economic plausibility b) Goodness-of-fit c) Individual t tests for cost parameters

(2). Which model would you recommend and why?

(3). For the model with two drivers, predict the overhead cost for 1600 machine hours and 50 production runs.

(4). Prepare a 99% confidence interval for the forecast overhead in part (3) above.

Part B: (5 marks) Clearly explain with details the confidence interval obtained in (part 4)?