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InStay would like to predict their total monthly overhead cost based on machine hours (DLH) used. Data for the last 24 months is below. Required:

InStay would like to predict their total monthly overhead cost based on machine hours (DLH) used. Data for the last 24 months is below.

Required:

1. Use this data to prepare cost formulas using a) the high-low method, and b) regression analysis. Show the cost formula from each calculation in the form:

Overhead = Fixed cost + MH*(Variable OH per unit)

  1. Assume that InStay decides to use the cost formula from the regression analysis. Briefly explain in your own words how the company will make use of the formula.

MH

OH

129,088

2,300,451

106,612

1,878,012

105,028

1,829,452

129,107

2,313,372

110,759

1,813,767

124,427

2,186,002

102,049

1,707,997

131,238

2,197,812

101,943

1,787,236

133,884

2,228,998

101,270

1,791,169

134,175

2,367,479

113,797

1,917,197

101,508

1,837,012

130,316

2,239,440

101,532

1,783,849

93,878

1,578,677

123,525

2,168,136

127,824

2,193,289

104,205

1,750,702

102,958

1,830,086

134,706

2,394,475

116,636

2,063,260

97,906

1,690,091

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