Question

Required information Problem 6-42 Continuation of Preceding Problem; Computing Least-Squares Regression Estimates; Comparing Multiple Methods (Appendix) (LO 6-1, 6-2, 6-5, 6-6, 6-9) [The following information applies to the questions displayed below) Martha's Vineyard Marine Supply is a wholesaler for a large variety of boating and fishing equipment. The company's controller, Mathew Knight, has recently completed a cost study of the firm's material handling department in which he used work measurement to quantify the department's activity. The control factor unit used in the work-measurement study was hundreds of pounds of equipment unloaded or loaded at the company's loading dock Knight compiled the following data Month January February March April May June July August September October November December Units of Activity (hundreds of pounds of equipment loaded or unloaded) 2,200 2.00 1,700 1.000 2.600 2.300 2.400 2.200 3.00 1.500 1,600 1.800 Material Handling Departent costs $12.100 11,700 11.450 10.6 11,500 11, 150 12. 11,800 12.640 11.50 11,750

Answer 1

Solution:

1.

2200 1700 1400 2600 2800 2400 2200 3000 1500 1600 1800 25200 Y X*Y $12,100 $ 26,620,000 $11,700 $ 23,400,000 $11,450 $ 19,465,000 $10,600 $ 14,840,000 $11,500 $ 29,900,000 $13,150 $ 36,820,000 $12,400 $ 29,760,000 $11,800 $ 25,960,000 $12,600 $ 37,800,000 $11,250 $ 16,875,000 $11,750 $ 18,800,000 $11,750 $ 21,150,000 $142,050 $ 301,390,000 Square of X 4,840,000 4,000,000 2,890,000 1,960,000 6,760,000 7,840,000 5,760,000 4,840,000 9,000,000 2,250,000 2,560,000 3,240,000 55,940,000 Here ΣX = $47,000, ΣΥ = $223,800, ΣΧΥ = $953,590,000 and Σx = $203,480,000 Variable cost per rental return = ηΣxy - (Σχ)(Σy). ηΣx? - (Σx)2 = [12x301,390,000 - 25200*142050] (12*55940000 - 252002) = $1.02 Σy - bΣx Fixed cost per month = n = (142050-1.02*25200)/12 = $9,692

2. Equation Y = $9,692 + $1.02x

3. Total cost at 2,450 activity level = 9,692 + 1.02*2450 = $12,191