1. Keesha House, Inc. has two producing divisions (Textbooks and Pocketbooks) and three auxiliary departments (Finance and Administration, Personnel and Public Relations). Budgeted 2006 costs are as follows (in US Dollars):

Textbooks, 2,820,000; Pocketbooks, 3,400,000; Finance and Administration, 1,800,000; Personnel, 840,000; Public Relations, 960,000

The overhead costs in the Pocketbook Division can be broken down into their fixed and variable elements as follows:

Activity-Driven OH Costs Rate per Equipment Hour

Indirect manpower costs	$ 96
Indirect materials	14
Human resources benefits	30

Within a monthly activity range of 600-1,000 equipment hours, an annual amount totaling $336,000 will be unchanged. The amount is composed of Supervision (40%), Insurance and Taxes (22%), Depreciation (30.5%) and Maintenance (7.5%).

The said division also experienced equipment hours and utility costs (respectively) for the past eight months. They are as follows:

December	810	$ 708
November	1,100	760
October	680	673
September	540	623
August	860	721
July	640	660
June	720	682
May	920	730

The service departments and select potential allocation bases are presented below

Iin order of their benefit-provided ranking. Management believes that personnel

costs should be allocated on the basis of number of employees, administration

costs on the basis of number of employee hours and public relation costs on the

basis of dollar assets employed.

# of Employee Hrs. # of Employees Dollars of Assets

Employed

Administration	16,890	8	$ 600,003
Personnel	11,097	5	243,701
Public Relation	9,543	4	155,890
Textbook	18,656	9	609,697
Pocketbook	22,231	11	989,898

Required:

1. Using the high-low method, separate the Pocketbook Division’s utility cost into its fixed and variable components (5 points).
2. Using the least squares (simple regression) method, separate the Pocketbook Division’s utility cost into its fixed and variable components (5 points).