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The Hard Rock Mining Company is developing cost formulas for management planning and decision - making purposes. The company s cost analyst has concluded that

 
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 30,0006,500 $ 65,000
Second 19,0004,500 $ 60,000
Third 35,0005,500 $ 75,000
Fourth 27,0007,500 $ 90,000
Year 2:
First 33,00013,000 $ 115,000
Second 40,00013,500 $ 120,000
Third 45,00011,000 $ 100,000
Fourth 43,00014,000 $ 135,000
Problem 5A-6 Part 1(Algo)
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.)

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