Question
The Hard Rock Mining Company is developing cost formulas for management planning and decision-making purposes. The companys cost analyst has concluded that utilities cost is
The Hard Rock Mining Company is developing cost formulas for management planning and decision-making purposes. The companys cost analyst has concluded that utilities cost is a mixed cost, and he is attempting to find a base that correlates with the cost. The controller has suggested that tons mined might be a good base to use in developing a cost formula. The production superintendent disagrees; she thinks that direct labor-hours would be a better base. The cost analyst has decided to try both bases and has assembled the following information:
Quarter | Tons Mined | Direct Labor-Hours | Utilities Cost |
---|---|---|---|
Year 1: | |||
First | 33,000 | 6,800 | $ 68,000 |
Second | 21,000 | 4,800 | $ 63,000 |
Third | 38,000 | 5,800 | $ 78,000 |
Fourth | 30,000 | 7,800 | $ 93,000 |
Year 2: | |||
First | 36,000 | 13,600 | $ 118,000 |
Second | 43,000 | 14,400 | $ 123,000 |
Third | 48,000 | 11,600 | $ 103,000 |
Fourth | 46,000 | 14,600 | $ 138,000 |
Required:
1-a. Using tons mined as the independent variable, prepare a scattergraph that plots tons mined on the horizontal axis and utilities cost on the vertical axis.
Instructions: 1. On the graph below, use the point tool (Year 1-1st quarter) to plot tons mined on the horizontal axis and utilities cost on the Vertical axis. 2. Repeat the same process for the plotter tools (Year 1-2nd quarter to Year 2-4th quarter). 3. To enter exact coordinates, click on the point and enter the values of x and y. 4. To remove a point from the graph, click on the point and select delete option.
2-a. Using direct labor-hours as the independent variable, prepare a scattergraph that plots direct labor-hours on the horizontal axis and utilities cost on the vertical axis.
Instructions: 1. On the graph below, use the point tool (Year 1-1st quarter) to plot direct labor-hours on the horizontal axis and utilities cost on the Vertical axis. 2. Repeat the same process for the plotter tools (Year 1-2nd quarter to Year 2-4th quarter). 3. To enter exact coordinates, click on the point and enter the values of x and y. 4. To remove a point from the graph, click on the point and select delete option.
2-b. Using the least-squares regression method, estimate the variable utilities cost per direct labor-hour and the total fixed utilities cost per quarter. Express these estimates in the form Y = a + bX. (Round the Variable cost to 2 decimal places and Fixed Cost to the nearest whole dollar amount.)
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