Question

Adriana Corporation manufactures football equiptment. Multiple regression results from the data of Adriana Corporation are as follows: Equation: Overhead=. $24,256 + ($32.60 x labor hours ) + ($41.20 x Machine hours). Statistical data: Correlation coefficient 0.982. R*2 0.962.

Estimate overhead using the multiple regression results, assuming that the company expects the plant to operate at a monthly average of 9,060 machine hours and 3,000 labor hours next year.

Overhead costs: ______?

Answer 1

Regression Equation

In the statistical modeling, regression analysis is a set of statistical processes for estimating the relationships between a dependent variable and one or more independent variable.

The most common form of regression analysis is linear regression, in which one can find the line that most likely fits the data according to most mathematical criterion.

As per the above requirement Overhead cost is determined by putting the values of labor hours and the machine hour in the equation to get the desired result.

Table showing computation of Total Overhead cost

Items	Amount
Fixed charges	$24,256
Labor cost ($32.60 * 3,000 hour)	$97,800
Machine cost ($41.20 * 9,060 hour)	$373,272
Total Overhead cost (fixed charges + labor cost + machine cost)	$495,328