Question

ment Help Save & E Che The Hard Rock Mining Company is developing cost formulas for management planning and decision making purposes. The company's cost analyst has concluded that utlities cost is a mixed cost, and he is attempting to find a base that correlates with the cost. 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: Direct La Tons Mined Hours Quarter Year 1: Cost First Second Third Fourth 29,000 19,000 34,000 26,000 6,400 4,400 5,400 7,400 64,000 59,000 74,000 89,000 Year 2: 32,000 39,000 44,000 42,000 13,800 $132,000 12,800 $135,000 First Second Third Fourth 11,800 99,000 14,800 $140,000

Answer 1

		Direct Labor Hour	Utilities Cost
		4,400	$59,000
		5,400	$74,000
		6,400	$64,000
		7,400	$89,000
		11,800	$99,000
		12,800	$135,000
		13,800	$132,000
		14,800	$140,000
				Using "Regression Tool of Data Analysis
				Click "Data
				Click "Data"Analysis
				Input Y Range Utilities Cost
				Input X Range Direct labor Hours
		SUMMARY OUTPUT
		Regression Statistics
		Multiple R	0.957993
		R Square	0.917751
		Adjusted R Square	0.904043
		Standard Error	10217.7
		Observations	8
		ANOVA
			df	SS	MS	F	Significance F
		Regression	1	6989591700	6.99E+09	66.94922	0.00018
		Residual	6	626408299.9	1.04E+08
		Total	7	7616000000
			Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
		Intercept	25586.35	9672.251257	2.645335	0.038266	1919.199	49253.49	1919.199	49253.49
		X Variable 1	7.647256	0.934615188	8.182251	0.00018	5.360335	9.934177	5.360335	9.934177
				Intercept	25586.35
				Fixed Cost	$25,586
				X Variable1	7.647256
				Slope	7.647256
				Variable Utilities Cost per Direct labor Hour	$7.65
				Y=a+bX
				a=	$25,586
				b=	$7.65
				EQUATION;
				Y	=	$25,586	+	7.65	X
		Direct Labour Hour	Utilities Cost	Calculated Cost as per above regression Equation
		4,400	$59,000	59,246
		5,400	$74,000	66,896
		6,400	$64,000	74,546
		7,400	$89,000	82,196
		11,800	$99,000	115,856
		12,800	$135,000	123,506
		13,800	$132,000	131,156
		14,800	$140,000	138,806