Question

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	30,000	6,500	$	65,000
Second	19,000	4,500	$	60,000
Third	35,000	5,500	$	75,000
Fourth	27,000	7,500	$	90,000
Year 2:
First	33,000	14,300	$	115,000
Second	40,000	13,300	$	120,000
Third	45,000	12,300	$	100,000
Fourth	43,000	15,300	$	135,000

Required:

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.

Instructions:    

1. On the graph below, use the point tool (Year 1-1st quarter) to plot tons mined 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.

4. To remove a point from the graph, click on the point and select delete option.

1(b). 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.)

The Hard Rock Mining Company is developing cost formulas for management is cost analyst has a mixed cost, and he is attempting to find a base with which the cost correlated. The controller has supgested superintendent isagrees; she thinks that direct labo-hours would be a has assembled the following Inormation use in developing a cost formula. The production a better base. The cost analyst has decided to try both bases and Mines Laben-Hours Cont 30,000 4,500 19.0000 .000 s 65,000 60,000 Sacond 350007500 27,000 33,000 43,000 13.300115,000 $120,000 Sacond45.00000 THird Fourth 12,300 100,000 $135,000 Required Ca) Using t tons mined as the independent variable, prepare a scattergraph that plots tons mined or the horizontal axis and utiliies cost on t the vertical axis. Instructions 1. On the graph below, use the point tool (Year 1-1st quarter) to plot tons mined 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. 4. To remove a point from the graph, click on the point and select delete option. 10000 20000 30000 40000 50000 60000 Tons Mined resot 1(b). Determine a cost formula for utilities cost u the Variable cost per unit to 2 decimal places, and Fixed Cost to the nearest dollar.) sing least-squares regression. Express this cost formula in the form Y., + bX. (Ro Ya

Answer 1

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