Healthy Bar, Inc., produces energy bars for sports enthusiasts. The companys fiscal year ends on December 31. The production manager, Jim Wallace, is establishing a cost budget for the production department for each month of this coming quarter (January through March). At the end of March, Jim will be evaluated based on his ability to meet the budget for the three months ending March 31. In fact, Jim will receive a significant bonus if actual costs are below budgeted costs for the quarter.

The production budget is typically established based on data from the last 18 months. These data are as follows:

Reporting Period (Month)	Total Overhead Costs	Total Machine Hours
July	$695,000	3,410
August	700,000	3,454
September	665,000	2,453
October	725,000	3,740
November	655,000	2,442
December	672,500	2,695
January	687,500	2,937
February	715,000	3,652
March	625,000	2,200
April	632,500	2,244
May	650,000	2,255
June	702,500	3,520
July	730,000	3,542
August	735,000	3,597
September	697,500	2,552
October	762,500	3,894
November	687,500	2,541
December	705,000	2,805

You are the accountant who assists Jim in preparing an estimate of production costs for the next three months. You intend to use regression analysis to estimate costs, as was done in the past. Jim expects that 3,100 machine hours will be used in January, 3,650 machine hours in February, and 2,850 machine hours in March.

Jim approaches you and asks that you add $100,000 to production costs for each of the past 18 months before running the regression analysis. As he puts it, After all, management always takes my proposed budgets and reduces them by about 10 percent. This is my way of leveling the playing field!

Why did Jim ask you to add $100,000 to production costs for each of the past 18 months? How should you handle Jims request?