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The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed. The costs must be broken into their fixed and variable elements so that the cost behavior of the power usage activity can be properly described. Machine hours have been selected as the activity driver for power costs. The following data for the past eight quarters have been collected:
| Quarter | Machine Hours | Power Cost |
| 1 | 20,000 | $26,000 |
| 2 | 25,000 | $38,000 |
| 3 | 30,000 | $42,500 |
| 4 | 22,000 | $37,000 |
| 5 | 21,000 | $34,000 |
| 6 | 18,000 | $29,000 |
| 7 | 24,000 | $36,000 |
| 8 | 28,000 | $40,000 |
Use the method of least squares to compute a power cost formula. Evaluate the coefficient of determination.
| Variable rate (to two decimal places) | $________ | per machine hour |
| Fixed cost (to the nearest dollar) | $_________ | |
| Coefficient of determination (R2) (to one decimal place). | ___________ | % |
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Worship Audit Making Good Worship Better
Authors: Mark Earcy
1st Edition
1851742948, 978-1851742943
