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If the cost function was calculated using simple regression analysis, in one sentence explain what the primary difference would be between using simple regression analysis and the high-low method to calculate the cost equation.

05 / 03 / 2018 Assignment

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REMInc. collected the following data to determine their overhead cost function:

Overhead Costs Direct Labor Hours

$20,000 1,250

$28,500 1,800

$26,750 1,400

$25,900 1,375

$30,200 2,100

1. Calculate the cost function using the high-low method.

2. If direct labor hours in the coming period are expected to be 1,600, what is the estimated overhead cost using the cost function calculated in Part 1?

3. What would the total fixed overhead be estimated at if the expected number of direct labor hours for the coming period was 1,750?

4. If the cost function was calculated using simple regression analysis, in one sentence explain what the primary difference would be between using simple regression analysis and the high-low method to calculate the cost equation.


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