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 | 34,000 | 6,900 | $ 69,000 |
Second | 21,000 | 4,900 | $ 64,000 |
Third | 39,000 | 5,900 | $ 79,000 |
Fourth | 31,000 | 7,900 | $ 94,000 |
Year 2: | |||
First | 37,000 | 13,800 | $ 119,000 |
Second | 44,000 | 14,700 | $ 124,000 |
Third | 49,000 | 11,800 | $ 104,000 |
Fourth | 47,000 | 14,800 | $ 139,000 |
1-b. Using the least-squares regression method, estimate the variable utilities cost per ton mined and the total fixed utilities cost per quarter. Express these estimates in the form Y=a+bX. (Round the Variable cost per unit to 2 decimal places and Fixed Cost to the nearest whole dollar amount.) 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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