This paper circulates around the core theme of Using Excel develop three scatter diagrams showing overhead costs against each of the proposed independent variables. Comment on whether these scatter diagrams indicate that linearity is a reasonable assumption for each together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
The CEO of Milton Manufacturing Company has asked you to develop a cost equation to predict monthly overhead costs in its production department. You have collected the following data for the last 10 months: Overhead costs (OH$) and the proposed independent variables: Number of machine hours worked (MH), number of direct labour hours (DLH) and number of indirect labour workers (IL Workers).
| OH ($) |
MH |
DLH |
IL Workers |
| 2,000 |
9,500 |
1,800 |
3 |
| 4,500 |
20,000 |
4,200 |
8 |
| 3,000 |
14,000 |
2,500 |
15 |
| 2,700 |
13,000 |
2,400 |
10 |
| 6,000 |
28,000 |
5,000 |
16 |
| 5,100 |
25,000 |
4,800 |
12 |
| 8,000 |
42,000 |
8,100 |
6 |
| 4,800 |
25,000 |
4,500 |
8 |
| 7,500 |
35,000 |
6,900 |
14 |
| 6,500 |
32,000 |
6,000 |
11 |
(a) The CEO suggests that he has heard that the high-low method of estimating costs works
fairly well and should be inexpensive to use. Write a response to this suggestion for the CEO indicating the advantages and disadvantages, including the calculation of a cost equation for this data using MH as the cost driver. (5 marks)
(b) Using Excel develop three scatter diagrams showing overhead costs against each of the proposed independent variables. Comment on whether these scatter diagrams indicate that linearity is a reasonable assumption for each. (5 marks)
