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Hello, please explain your method of solving these problems. My Cost Accounting teacher does not really teach us how to solve her example questions. Thanks!
Hello, please explain your method of solving these problems. My Cost Accounting teacher does not really teach us how to solve her example questions.
Thanks!
y = $43,563 + 14.66X
10-31 Regression analysis, service company. (CMA, adapted) Linda Olson owns a professional character business in a large metropolitan area. She hires local college students to play these characters at children's parties and other events. Linda provides balloons, cupcakes, and punch. For a standard party the cost on a per-person basis is as follows: Balloons, cupcakes, and punch $ 7 Labor (0.25 hour x $20 per hour) 5 Overhead (0.25 hour x $40 per hour 10 Total cost per person $22 Linda is quite certain about the estimates of the materials and labor costs, but is not as comfortable with the overhead estimate. The overhead estimate was based on the actual data for the past 9 months, which are presented here. These data indicate that overhead costs vary with the direct labor-hours used. The $40 estimate was determined by dividing total overhead costs for the 9 months by total labor-hours. Month Labor-Hours Overhead Costs April May June July August September October November December Total 1,400 1,800 2,100 2,200 1,650 1,725 1,500 1,200 1.900 15,475 $ 65,000 71,000 73,000 76,000 67,000 68,000 66,500 60,000 72.500 $619.000 | Required: 1. Plot the relationship between overhead costs and labor-hours. Draw the regression line and evaluate it using the criteria of economic plausibility, goodness of fit, and slope of the regression line. 2. Using data from the regression analysis, what is the variable cost per person for a standard party? 3. Linda Olson has been asked to prepare a bid for a 20-child birthday party to be given next month. Determine the minimum bid price that Linda would be willing to submit to recoup variable costsStep by Step Solution
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