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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 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: Quarter Year 1: First Second Third Fourth Year 2:1 First Second Third Fourth Tons Mined 18,000 13,000 23,000 15,000 21,000 28,000 33,000 31,000 Direct Labor- Hours 5,300 3,300 4,300 6,300 10,600 9,900 8,600 11,600 Utilities Cost $ 53,000 $ 48,000 $ 63,000 $78,000 $ 115,000 $ 120,000 $ 88,000 $ 126,000

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: Quarter Year 1: First Second Third Fourth Year 2:1 First Second Third Fourth Tons Mined 18,000 13,000 23,000 15,000 21,000 28,000 33,000 31,000 Direct Labor- Hours 5,300 3,300 4,300 6,300 10,600 9,900 8,600 11,600 Utilities Cost $ 53,000 $ 48,000 $ 63,000 $78,000 $ 115,000 $ 120,000 $ 88,000 $ 126,000

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter13: Regression And Forecasting Models
Section: Chapter Questions
Problem 40P: The Baker Company wants to develop a budget to predict how overhead costs vary with activity levels....
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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: Quarter Year 1: First Second Third Fourth Year 2: First Second Third Fourth Tons Mined 18,000 13,000 23,000 15,000 21,000 28,000 33,000 31,000 Direct Labor- Hours 5,300 3,300 4,300 6,300 10,600 9,900 8,600 11,600 Utilities Cost $ 53,000 $ 48,000 $ 63,000 $ 78,000 $ 115,000 $ 120,000 $ 88,000 $ 126,000
Transcribed Image Text: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: Quarter Year 1: First Second Third Fourth Year 2: First Second Third Fourth Tons Mined 18,000 13,000 23,000 15,000 21,000 28,000 33,000 31,000 Direct Labor- Hours 5,300 3,300 4,300 6,300 10,600 9,900 8,600 11,600 Utilities Cost $ 53,000 $ 48,000 $ 63,000 $ 78,000 $ 115,000 $ 120,000 $ 88,000 $ 126,000
1-b. Using the least-squares regression method, estimate the variable utilities cost per ton mined and the total fixed utilities cost per quarter. Express these estimates in the form Y=a+bX. (Round the Variable cost per unit to 2 decimal places and Fixed Cost to the nearest whole dollar amount.)
Transcribed Image Text:1-b. Using the least-squares regression method, estimate the variable utilities cost per ton mined and the total fixed utilities cost per quarter. Express these estimates in the form Y=a+bX. (Round the Variable cost per unit to 2 decimal places and Fixed Cost to the nearest whole dollar amount.)
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