A company ran a regression analysis using direct labor hours as the independent

Question

A company ran a regression analysis using direct labor hours as the independent variable and manufacturing overhead costs as the dependent variable. The results are summarized below: Intercept $14,600 Slope $12.55 Correlation coefficient .931 r-squared .867 The company is planning on operating at a level that would require 12,000 direct labor hours per month in the upcoming year. Required: (a) Use the information from the regression analysis to write the cost estimation equation for the manufacturing overhead costs. (b) Compute the estimated manufacturing overhead costs per month for the upcoming year.

Explanation / Answer

(a) Manufacturing overhead cost = $14600 + 12.55 x Direct Labour hours (b) Manufacuring overhead cost = 14600 + 12.55 x 11000 = $152650 Hope this helps!

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