Question
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)
- 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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