Question: ROUSSEAU CORPORATION
The ROUSSEAU CORPORATION is a manufacturer of chairs. The following information was collected over the past twelve months:
Month Machine Materials Overhead
Number Hours Cost Costs
1 350 $4,750 $4,500
2 340 4,600 3,445
3 320 4,200 3,780
4 380 5,900 5,250
5 350 4,600 3,800
6 400 5,250 5,100
7 320 4,350 4,450
8 300 4,350 4,200
9 420 6,000 5,475
10 390 4,950 4,760
11 340 4,450 4,325
12 290 3,800 3,975
REQUIRED: 1. Prepare a scattergraph graphing overhead costs against machine hours. Then prepare a second scattergraph graphing overhead costs against materials cost.
2. Which independent variable seems to be the "best" driver of overhead costs? Explain.
3. If machine hours is identified as the "best" driver, using the high-low method, project the monthly overhead costs for month 13, using 380 machine hours.
4. Would the use of the least square regression method offer advantages over the high-low method? Identify someadvantages (please notice that the word "advantages" is plural).