Cost estimation using regression analysis. Milky Chocolates has observed the following overhead costs for the past 12 months:
|
Month
|
Overhead Costs
|
Boxes of Output
|
|
January
|
$11,400
|
4,500
|
|
February
|
15,600
|
11,000
|
|
March
|
16,800
|
12,000
|
|
April
|
12,000
|
5,500
|
|
May
|
14,100
|
9,000
|
|
June
|
15,600
|
10,500
|
|
July
|
13,200
|
7,500
|
|
August
|
12,300
|
5,000
|
|
September
|
15,600
|
11,500
|
|
October
|
12,900
|
6,000
|
|
November
|
14,400
|
8,500
|
|
December
|
15,000
|
10,000
|
The results of the regression analysis are:
TC ¼ $8,781 þ ð$0:63 x Number of BoxesÞ
a. Plot the data and the regression line.
b. Estimate total monthly costs for a month when 10,200 boxes of chocolate are produced.