Question

Required information 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 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 Labor- Utilities Hours Cost Tons Mined Quarter Year 1: First Second Third Fourth Year 2: First Second Third Fourth 23,000 16,000 28,000 20,000 5,800 3,800 4,800 6,800 $ 58,000 $ 53,000 $ 68,000 $ 83,000 26,000 33,000 38,000 36,000 10,800 9,800 8,800 11,800 $108,000 $113,000 $ 93,000 $128,000 2-a. 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. Instructions: 1. On the graph below, use the point tool (Year 1-1st quarter) to plor direct labor-hours on the horizontal axis and utilities cost on the Vertical axis. 2. Repeat the same process for the plotter tools (Year 1-2nd quarter to Year 2-4th quarter), 3. To enter exact coordinates, click on the point and enter the values of x and y. A TA FAm vennine from the aranh lirinn hannint and calar dolara Antinn 3 2 < Prey Next > of 3 !!! search

Answer 1

(1)

Quarter	Direct labour hours	Utilities cost
Y1 Q1	5,800	$          58,000
Y1 Q2	3,800	$          53,000
Y1 Q3	4,800	$          68,000
Y1 Q4	6,800	$          83,000
Y2 Q1	10,800	$        108,000
Y2 Q2	9,800	$        113,000
Y2 Q3	8,800	$          93,000
Y2 Q4	11,800	$        128,000

$140,000 $120,000 $100,000 $80,000 $60,000 Utilities cost $40,000 $20,000 2,000 4,000 6,000 8,000 10,000 12,000 14,000

(2) Regression equation required , y = 17800 + 9x

Working:

Regression equation, y = a+bx

Variable cost = b and

5 = ηΣxy - (Σκ)(Σy) ηΣx - (Σx)

Fixed cost = a

Σy - ΕΣx n

Quarter	Direct labour hours (x)	Utilities cost(y)	X^2	xy
Y1 Q1	5,800	$          58,000	33,640,000	$      336,400,000
Y1 Q2	3,800	$          53,000	14,440,000	$      201,400,000
Y1 Q3	4,800	$          68,000	23,040,000	$      326,400,000
Y1 Q4	6,800	$          83,000	46,240,000	$      564,400,000
Y2 Q1	10,800	$        108,000	116,640,000	$ 1,166,400,000
Y2 Q2	9,800	$        113,000	96,040,000	$ 1,107,400,000
Y2 Q3	8,800	$          93,000	77,440,000	$      818,400,000
Y2 Q4	11,800	$        128,000	139,240,000	$ 1,510,400,000
Total	62,400	$        704,000	546,720,000	$ 6,031,200,000

By substituting the values in the equations,

Variable cost = $9

Fixed cost = $17,800