Landis Company uses a job-order costing system with a predetermined plantwide overhead rate based on direct labor-hours. In an effort to improve its ability to measure job profitability and make decisions, the company is considering allocating some of its overhead costs, such as electrical costs, based on machine-hours instead of direct labor-hours. To further explore the potential benefits of this approach, the company has gathered the following eight weeks of actual (not estimated) data with respect to its electrical costs:     Machine-Hours Direct Labor-Hours Electrical Costs Week 1 7,700 8,910 76,200             Week 2 8,900 8,920 83,800             Week 3 8,600 8,870 81,000             Week 4 8,100 8,840 80,800             Week 5 7,600 8,990 79,400             Week 6 7,100 8,940 70,700             Week 7 5,500 8,870 61,500             Week 8 6,800 8,910 73,900             Total 60,300 71,250 607,300               Using the data above, the company translated these actual amounts into annual estimates as follows:     Machine-Hours Direct Labor-Hours Electrical Costs Total for eight weeks (a) 60,300 71,250 607,300             52 weeks ÷ 8 weeks (b) 6.5 6.5 6.5             Annual estimate (a) × (b) 391,950 463,125 3,947,450               Excel is the first table without the total. 1. Using the annualized data, what is the estimated electrical cost per direct labor-hour? 2. Using the annualized data, what is the estimated electrical cost per machine-hour? 3. Assume that the company plans to bid on Job Q400 that would require 270 direct labor-hours and 350 machine-hours. 3- A) How much electrical cost would be allocated to Job Q400 using the estimated electrical cost per direct labor-hour from requirement 1? 3-B) How much electrical cost would be allocated to Job Q400 using the estimated electrical cost per machine-hour from requirement 2?

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Landis Company uses a job-order costing system with a predetermined plantwide overhead rate based on direct labor-hours. In an effort to improve its ability to measure job profitability and make decisions, the company is considering allocating some of its overhead costs, such as electrical costs, based on machine-hours instead of direct labor-hours. To further explore the potential benefits of this approach, the company has gathered the following eight weeks of actual (not estimated) data with respect to its electrical costs:
 

  Machine-Hours Direct Labor-Hours Electrical Costs
Week 1

7,700

8,910 76,200            
Week 2 8,900 8,920 83,800            
Week 3 8,600 8,870 81,000            
Week 4 8,100 8,840 80,800            
Week 5 7,600 8,990 79,400            
Week 6 7,100 8,940 70,700            
Week 7 5,500 8,870 61,500            
Week 8 6,800 8,910 73,900            
Total 60,300 71,250 607,300            
 


Using the data above, the company translated these actual amounts into annual estimates as follows:
 

  Machine-Hours Direct Labor-Hours Electrical Costs
Total for eight weeks (a) 60,300 71,250 607,300            
52 weeks ÷ 8 weeks (b) 6.5 6.5 6.5            
Annual estimate (a) × (b) 391,950 463,125 3,947,450            
 

Excel is the first table without the total.

1. Using the annualized data, what is the estimated electrical cost per direct labor-hour?
2. Using the annualized data, what is the estimated electrical cost per machine-hour?

3. Assume that the company plans to bid on Job Q400 that would require 270 direct labor-hours and 350 machine-hours.

3- A) How much electrical cost would be allocated to Job Q400 using the estimated electrical cost per direct labor-hour from requirement 1?

3-B) How much electrical cost would be allocated to Job Q400 using the estimated electrical cost per machine-hour from requirement 2?

4. Refer to the eight weeks of actual data included in the Excel template.

4-A) Use Excel to prepare a scattergraph plot with direct labor-hours on the horizontal axis and electrical costs on the vertical axis.

4-B) Use Excel to prepare a scattergraph plot with machine-hours on the horizontal axis and electrical costs on the vertical axis.

4-C) Which of the two allocation bases (direct labor-hours or machine-hours) appears to be the better choice for assigning electrical costs to jobs?

5. Refer to the eight weeks of actual data included in the Excel template.

5-A) Use least-squares regression to estimate the fixed electrical cost per week  and the variable electrical cost per machine-hour. (You can refer to Appendix 5A of the text for a brief illustration of the method being used to perform the regression computations.)

5-B) What is the R2 for the regression line in requirement 5a?

5-C) What does the R2 tell us?

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I am stuck on question 5. Can't figure how to solve it

5. Refer to the eight weeks of actual data included in the Excel template.

5-A) Use least-squares regression to estimate the fixed electrical cost per week  and the variable electrical cost per machine-hour. (You can refer to Appendix 5A of the text for a brief illustration of the method being used to perform the regression computations.)

5-B) What is the R2 for the regression line in requirement 5a?

5-C) What does the R2 tell us?

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