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	15,000	5,000	$ 50,000
Second	11,000	3,000	$ 45,000
Third	21,000	4,000	$ 60,000
Fourth	12,000	6,000	$ 75,000
Year 2:
First	18,000	10,000	$ 100,000
Second	25,000	9,000	$ 105,000
Third	30,000	8,000	$ 85,000
Fourth	28,000	11,000	$ 120,000

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.

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.)

Would you recommend that the company use tons mined or direct labor-hours as a base for planning utilities cost?

multiple choice

• Tons mined

• Direct labor-hours

Utilities Cost 140000 Tools 120000 Year 1 - 1st qu Year 1 - 2nd qi 100000 80000 Year 1 - 3rd q Year 1 - 4th qu 60000 40000 Year 2 - 1st q Year 2 - 2nd q 20000 0 5000 35000 10000 15000 P2000025000 30000 Tons Mined