Question

Cycle Accessories manufacturers cellphone holders that can be mounted on the handle bars of most motorcycles. The manufacturing process is highly automated and management feels that machine-hours are likely the main driver of overhead costs. Data from the most recent year are shown below.

Month	Machine-Hours	Overhead Costs
January	2,500	$	55,400
February	2,560		57,620
March	2,800		63,800
April	3,520		69,320
May	3,700		71,460
June	4,300		72,480
July	4,900		79,620
August	5,500		80,450
September	5,200		77,800
October	3,700		70,640
November	2,860		65,460
December	4,900		77,340

Required:

1. Using least-squares regression, estimate the fixed cost and variable cost elements of monthly overhead costs. Estimate the fixed cost element to the nearest dollar and the variable cost element to the nearest cent.

2. If the company expects to use 4,000 machine-hours next month, estimate total overhead costs.

Answer 1

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