High-Low, Scattergraph, and Regression Analysis; Manufacturing Company.Kitchen Inc., produces kitchen counter tops. Manufacturing overhead costs tend to fluctuate from one month to the next, and management would like to accurately estimate these costs for planning and decision-making purposes.The accounting staff at Kitchen Products recommends that costs be broken down into fixed and variable components. Because the production process is highly automated, most of the manufacturing overhead costs are related to machinery and equipment. The accounting staff believes the best starting point is to review historical data for costs and machine hours:

Reporting Period (Month)	Total Costs	Machine Hours
January	$278,000	1,550
February	280,000	1,570
March	266,000	1,115
April	290,000	1,700
May	262,000	1,110
June	269,000	1,225
July	275,000	1,335
August	286,000	1,660
September	250,000	1,000
October	253,000	1,020
November	260,000	1,025
December	281,000	1,600

These data were entered into a computer regression program, which produced the following output:

Coefficients
y-intercept	210,766
xvariable	45.31

Required:

1. A. Usethefourstepsofthehigh-lowmethodtoestimatetotalfixedcostspermonthandthevariablecostpermachinehour.StateyourresultsinthecostequationformY=f+vXbyfillinginthedollaramountsforfandv.
2. B.Usethefivestepsofthescattergraphmethodtoestimatetotalfixedcostspermonth,andthevariablecostpermachinehour.StateyourresultsinthecostequationformY=f+vXbyfillinginthedollaramountsforfandv.
3. C.UsetheregressionoutputgiventodevelopthecostequationY=f+vXbyfillinginthedollaramountsforfandv.
4. D.Usetheresultsofthehigh-lowmethod(a),scattergraphmethod(b),andregressionanalysis(c),toestimatecostsfor1,300machinehours.(Youwillhavethreedifferentanswersoneforeachmethod.)Whichapproachdoyouthinkismostaccurateandwhy?
5. E.Managementlikestheregressionanalysisapproachandasksyoutoestimatecostsfor5,000machinehoursusingthisapproach(thecompanyplanstoexpandbyopeninganotherfacilityandhiringadditionalemployees).Calculateyourestimate,andexplainwhyyourestimatemightbemisleading.