Business, 01.07.2021 17:10 giulianna41
Scatterplot, High-Low Method, Regression The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed; thus, they must be broken into their fixed and variable elements so that the cost behavior of the power usage activity can be properly described. Machine hours have been selected as the activity driver for power costs. The following data for the past eight quarters have been collected:
Quarter Machine Hours Power Cost
1 20,000 $26,000
2 25,000 $38,000
3 30,000 $42,500
4 22,000 $37,000
5 21,000 $34,000
6 18,000 $29,000
7 24,000 $36,000
8 28,000 $40,000
a. Using the high and low points (i. e., the high-low method), compute a power cost formula.
Total power cost = $ + ( $ x Number of machine hours )
b. Compare the results from this regression to those for the regression in Requirement 1. Which is better?
Answers: 2
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Scatterplot, High-Low Method, Regression The management of Wheeler Company has decided to develop co...
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