The following output of overhead on direct labor hours was obtained using regression analysis

Equation: Intercept $10,000 Slope 5.0 R-Squared 0.20

The company is planning to operate at a level that would call for 3,000 direct labor hours to be utilized for the coming year.

1. Use the regression output to write out the overhead cost equation.

2. Based on the regression equation, compute the estimated overhead cost for the coming year.

3. Management is considering using this cost estimate function for a large upcoming bid. What concerns, if any, would you raise regarding this?