The Hard Rock Mining Company is developing cost formulas for management planning and decision-making purposes. The company’s cost analyst has concluded that utilities cost is a mixed cost, and he is attempting to find a base with which the cost might be closely correlated. The controller has suggested that tons mined might be a good base to use in developing a cost formula. The production superintendent disagrees; she thinks that direct labor-hours would be a better base. The cost analyst has decided to try both bases and has assembled the following information: Quarter Tons Mined Direct Labor-Hours Utilities Cost Year 1: First 25,000 6,000 $ 60,000 Second 17,000 4,000 $ 55,000 Third 30,000 5,000 $ 70,000 Fourth 22,000 7,000 $ 85,000 Year 2: First 28,000 11,800 $ 118,000 Second 35,000 10,800 $ 123,000 Third 40,000 9,800 $ 95,000 Fourth 38,000 12,800 $ 132,000 1(a). Using tons mined as the independent variable, prepare a scattergraph that plots tons mined on the horizontal axis and utilities cost on the vertical axis. 1. Determine a cost formula for utilities cost using least-squares regression. Express this cost formula in the form Y = a + bX. (Round the Variable cost per unit to 2 decimal places, and Fixed Cost to the nearest dollar.) Using direct labor-hours as the independent variable, prepare a scattergraph that plots direct labor-hours on the horizontal axis and utilities cost on the vertical axis. 2. Determine a cost formula for utilities cost using least-squares regression. Express this cost formula in the form Y = a + bX. (Round the Variable cost to 2 decimal places, and Fixed Cost to the nearest dollar.)
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The Hard Rock Mining Company is developing cost formulas for management planning and decision-making purposes. The company’s cost analyst has concluded that utilities cost is a mixed cost, and he is attempting to find a base with which the cost might be closely correlated. The controller has suggested that tons mined might be a good base to use in developing a cost formula. The production superintendent disagrees; she thinks that direct labor-hours would be a better base. The cost analyst has decided to try both bases and has assembled the following information: |
| Quarter | Tons Mined |
Direct Labor-Hours |
Utilities Cost |
|
| Year 1: | ||||
| First | 25,000 | 6,000 | $ | 60,000 |
| Second | 17,000 | 4,000 | $ | 55,000 |
| Third | 30,000 | 5,000 | $ | 70,000 |
| Fourth | 22,000 | 7,000 | $ | 85,000 |
| Year 2: | ||||
| First | 28,000 | 11,800 | $ | 118,000 |
| Second | 35,000 | 10,800 | $ | 123,000 |
| Third | 40,000 | 9,800 | $ | 95,000 |
| Fourth | 38,000 | 12,800 | $ | 132,000 |
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| 1(a). |
Using tons mined as the independent variable, prepare a scattergraph that plots tons mined on |
1. Determine a cost formula for utilities cost using least-squares regression. Express this cost formula in the form Y = a + bX. (Round the Variable cost per unit to 2 decimal places, and Fixed Cost to the nearest dollar.)
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Using direct labor-hours as the independent variable, prepare a scattergraph that plots direct |
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2. Determine a cost formula for utilities cost using least-squares regression. Express this cost formula in the form Y = a + bX. (Round the Variable cost to 2 decimal places, and Fixed Cost to the nearest dollar.)
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