Question
The managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete
The managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c
Data
Overhead Costs Billable Hours
345000 3000
390000 4000
420000 5000
473000 6000
560000 7000
575000 8000
Develop a simple linear regression model between billable hours and overhead costs.
Overhead Costs= +Billable Hours
(Round the constant to one decimal place as needed. Round the coefficient to four decimal places as needed. Do not include the$ symbol in youranswers.)
b. Interpret the coefficients of your regression model.Specifically, what does the fixed component of the model mean to the consultingfirm?
Interpret the fixedterm, b0, if appropriate. Choose the correct answer below.
A. The value of b0 is the predicted billable hours for an overhead cost of 0 dollars.
B. It is not appropriate to interpret b0, because its value is the predicted billable hours for overhead costs of 0dollars, but the firm cannot have overhead costs of 0 dollars associated with a client.
C. For each increase of 1 unit in billablehours, the predicted overhead costs are estimated to increase by b0.
D. For each increase of 1 unit in overheadcosts, the predicted billable hours are estimated to increase by b0.
E.The value of b0 is the predicted overhead costs for 0 billable hours.
F. It is not appropriate to interpret b0, because its value is the predicted overhead costs for 0 billablehours, but someone with 0 billable hours would not actually be a client of the firm.
Interpret the coefficient of billablehours, b1, if appropriate. Choose the correct answer below.
A. The value of b1 is the predicted billable hours for an overhead cost of 0 dollars.
B. For each increase of 1 unit in overheadcosts, the predicted billable hours are estimated to increase by b1.
C. It is not appropriate to interpret b1, because its value is the predicted overhead costs for 0 billablehours, but someone with 0 billable hours would not actually be a client of the firm.
D. It is not appropriate to interpret b1, because its value is the predicted billable hours for overhead costs of 0dollars, but the firm cannot have overhead costs of 0 dollars associated with a client.
E. The value of b1is the predicted overhead costs for 0 billable hours.
F. For each increase of 1 unit in billablehours, the predicted overhead costs are estimated to increase by b1.
c. If a special job was available requiring 5,500 billable hours that would contribute a margin of $210,000 beforeoverhead, would the job beattractive?
Since the predicted overhead costs of a client with 5,500 billable hours would be $ , which is the margin of $210,000 beforeoverhead, the job be attractive.
(Round to the nearest dollar asneeded.)
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