Reference no: EM131814029

Problem - Plant ABC manufactures electrical components & has experienced difficulties with fluctuating monthly overhead costs.  Determine the cost behavior pattern of the historical data overhead cost.  The raw data are as follows:

	2010		2011
Month	Direct LH	Overhead Costs	Direct LH	Overhead Costs
January	30,000	$94,000	31,000	$96,000
February	35,000	109,000	34,000	103,000
March	32,000	99,500	33,000	103,000
April	33,000	100,000	32,000	97,000
May	30,000	91,500	30,000	90,000
June	29,000	85,500	28,000	86,500
July	24,000	80,500	22,000	77,500
August	20,000	74,500	23,000	81,000
September	22,000	79,000	25,000	83,500
October	27,000	85,000	27,000	82,500
November	26,000	81,500	25,000	81,000
December	29,000	88,000	28,000	85,000

Required -

a. Using the high-low method, determine the cost formula for overhead costs (use ALL of the data, i.e., ignore the years and combine the data).

b. Repeat (a.) above using regression analysis.

c. Prepare a graph, including ALL data for the two-year period.  Fit a regression line to the plotted points. (DO NOT compute variable and fixed cost elements from your regression line.)

d. Assume that Plant ABC works 32,500 direct labor-hours during a month.  Compute the expected overhead cost for the month, using the cost formulas developed above.