The Hereford Plant produces a single part used in airplane hydraulic systems. The plant manager has asked the plant controller to determine the monthly volume that would result in the plant meeting its monthly operating profit goal. Operating profits at the plant are calculated as revenue less direct costs (material and labor) less overhead (both fixed and variable). The monthly profit goal is $80,000 before taxes. The plant sells the part for $209 per unit. Direct costs are $106 per unit. Using the high-low approach, an analyst in the controller's office has estimated overhead costs at $32,740 per month for fixed overhead costs and $78 per unit for variable overhead costs. One of the other cost analysts decided to run a simple regression and based on that reported that, "a better cost estimation equation was" Monthly overhead $67,706 + $71 per unit The analyst reported that the R2 was about 67% and that the estimated coefficient for the intercept was "not significant." The data the controller's office used for both analyses follow: Overhead Costs $356,440 375,160 Month Units Produced 1 4,150 2 4,490 4,660 380,570 5,700 480,240 4,610 394,280 5,430 446,150 4,210 352,860 5,550 454,450 9 4,710 502,620 10 4,410 370,790 11 5,830 487,4801 12 5,640 456,450 The company controller is surprised that the cost estimates are so different and would like to reconcile this before reporting back to the plant manager. Required: a. Analyze the data and recommend a cost estimation equation below. Instructions: 1. Click on a point to the right of the graph. 2. Click within the araoh to place the point. Instructions: 1. Click on a point to the right of the graph. 2. Click within the graph to place the point. 3. Enter the exact coordinates in the dialog box that appears to the right of the graph. 4. Click save. 5. To change coordinates already saved, click on a point already placed in the graph, and enter revised coordinates in the dialog box that opens. Hereford Plant Overhead Costs (in dollars) 600000 500000 400000 300000 200000 100000 0 3500 4000 4500 5000 5500 6000 Units Produced Tools Month 1 Month 2 Month 3 Month 4 Month 5 Month 61