Least Squares Regression Analysis The management of Digger Inc., is trying to develop a cost formula for its major manufacturing overhead activities. Digger's manufacturing process is highly au- tomated and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed. The costs must be separated into their fixed and variable components so that the cost behavior of the power usage activity can be better understood. Analysts have determined that machine hours drive power usage; thus, machine hours are the cost driver for power costs. Nine months of data have been collected and are presented in the chart below: Period Machine Hours Power Cost January. . . . . . . . . . . . . . . 24,000 $32,500 February . . . . . . . . . . . . . . 30,000 47,500 March . . . . . . . . . . . . . . . . 36,000 53,125 April . . . . . . . . . . . . . . . . . 26,400 46,250 May . . . . . . . . . . . . . . . . . . 25,200 42,500 June . . . . . . . . . . . . . . . . . 21,600 36,250 July . . . . . . . . . . . . . . . . . . 28,800 45,000 August . . . . . . . . . . . . . . . 33,600 50,000 September . . . . . . . . . . . . 31,200 40,000 Note: For the following requirements, round the variable cost per unit to the nearest cent and the total fixed cost to the nearest dollar. Required a. Use the high and low points to estimate a power cost formula. b. Use the method of least squares in Excel (or a similar computer program) to estimate a power cost formula. c. Evaluate R 2 from requirement b. Are machine hours a good predictor of power costs?