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Quantitative analysis:Linear regression.

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5-26: Method of estimating costs: high-low

Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overhead costs. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from last yearâ??s operations:

Month labor-hours Machine-hours Overhead costs
1 3,625.00 3,775.00 513,435.00
2 3,575.00 7,035.00 518,960.00
3 3,400.00 7,600.00 549,575.00
4 3,700.00 7,265.00 541,400.00
5 3,900.00 7,955.00 581,145.00
6 3,775.00 7,895.00 572,320.00
7 3,700.00 6,950.00 535,110.00
8 3,625.00 6,530.00 510,470.00
9 3,550.00 7,270.00 532,195.00
10 3,975.00 7,725.00 565,335.00
11 3,375.00 6,490.00 503,775.00
12 3,550.00 8,020.00 564,210.00

5-30:

Methods of estimating costs: Simple Regression

Simple regression results from the data of Adriana Corporation (exercise 26) are as follow:

Equation:

Overhead = $217,610 + (88.61 * labor-hours)

Statistical Data

Correlation Coefficient .610
R^2 .925

Required:

Estimate overhead if the company expects the plant to operate at a monthly average of 3,000 labor-hours next year.

Only need help with question 5-30 but I've provided 5-26 because its need to answer any questions.

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Solution Summary

The problem deals with estimating overhead costs with a linear equation.

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