The Required Section solved

Cases Earth and Antistry, Inc, provides conmercial landscaping services, Sasha Caims, the firmis owner, " Case 6-50 wants to develop cos estimates that she can use to prepare bids on jobs. After analyzing the firm's costs. Interpeting Least Squares Cairns has developed the following preliminary cost estimates for cach 1,000 square feet of landscaping. Pegression, Landscaping Senver, Activity based Caims is quite certain about the estimates for direct material and direct labor. However, she is not as comfortable with the overhead estimate. The estimate for overhead is based on the overhead costs that were incurred during the past 12 months as presented in the following schedule. The etimate of 518 per direc-labor hour was determined by dividing the total overhead cosis for the 12 -month period ($6+8,000) by the total direct-labor hours (36,000). Cairns believes that overhead is affected by total monthly direct-labor hours. Cairns decided to perform a least-squares regression of overhead (OH) on total direc-labor hours (DL-H). The following regression formula was obtained. OH=26.200+9.250LH Required: 1. The overhead rate developed from the least-squares regression is different from Cairns' preliminary estimate of $18 per direct-labor hour. Explain the difference in the two overhead rates. 2. Using the overhead formula that was derived from the least-squares regression, determine a total variable-cost estimate for each 1,000 square feet of landscaping. 3. Cairns has been asked to submit a bid on a landscaping project for the city government consisting of 60,000 square feet. Cairns estimates that 40 percent of the direct-labor hours required for the project will be on overtime. Calculate the incremental costs that should be included in any bid that Cairns would submit on this project. Use the overhead formula derived from the leas-squares regression. 4. Should management rely on the overhead formula derived from the leas-squares regression as the hasis for the variable overhead component of its cost estimate? Explain your answer. 5. After attending a seminar on activity-based costing, Cairns decided to further analyze the company's activities and costs. She discovered that a more accurate portrayal of the firm's cost behavior Cases Earth and Antistry, Inc, provides conmercial landscaping services, Sasha Caims, the firmis owner, " Case 6-50 wants to develop cos estimates that she can use to prepare bids on jobs. After analyzing the firm's costs. Interpeting Least Squares Cairns has developed the following preliminary cost estimates for cach 1,000 square feet of landscaping. Pegression, Landscaping Senver, Activity based Caims is quite certain about the estimates for direct material and direct labor. However, she is not as comfortable with the overhead estimate. The estimate for overhead is based on the overhead costs that were incurred during the past 12 months as presented in the following schedule. The etimate of 518 per direc-labor hour was determined by dividing the total overhead cosis for the 12 -month period ($6+8,000) by the total direct-labor hours (36,000). Cairns believes that overhead is affected by total monthly direct-labor hours. Cairns decided to perform a least-squares regression of overhead (OH) on total direc-labor hours (DL-H). The following regression formula was obtained. OH=26.200+9.250LH Required: 1. The overhead rate developed from the least-squares regression is different from Cairns' preliminary estimate of $18 per direct-labor hour. Explain the difference in the two overhead rates. 2. Using the overhead formula that was derived from the least-squares regression, determine a total variable-cost estimate for each 1,000 square feet of landscaping. 3. Cairns has been asked to submit a bid on a landscaping project for the city government consisting of 60,000 square feet. Cairns estimates that 40 percent of the direct-labor hours required for the project will be on overtime. Calculate the incremental costs that should be included in any bid that Cairns would submit on this project. Use the overhead formula derived from the leas-squares regression. 4. Should management rely on the overhead formula derived from the leas-squares regression as the hasis for the variable overhead component of its cost estimate? Explain your answer. 5. After attending a seminar on activity-based costing, Cairns decided to further analyze the company's activities and costs. She discovered that a more accurate portrayal of the firm's cost behavior