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2 a) A production manager concerned about the relationship of machine hours and indirect labour cost....

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Accounting

2 a) A production manager concerned about the relationship ofmachine hours and indirect labour cost. Estimate the following datato help manager the unit properly in future. The results are asshown below.

Week

Machine Hour

Indirect Labour (cost)

1

68

1190

2

88

1211

3

62

1004

4

72

917

5

60

770

6

96

1456

7

78

1180

8

46

710

9

82

1316

10

94

1032

11

68

752

12

48

963

           Required: Using least square method;

  1. Establish the regression function for the manager.  
  2. Using the functions determine the indirect labour cost at 35units and 90 units of machinehours.                            

Answer & Explanation Solved by verified expert
3.9 Ratings (392 Votes)

Machine Hours R & M Cost
X Y XY X^2 = X * X
68 1190 80920 4,624
88 1211 106568 7,744
62 1004 62248 3,844
72 917 66024 5,184
60 770 46200 3,600
96 1456 139776 9,216
78 1180 92040 6,084
46 710 32660 2,116
82 1316 107912 6,724
94 1032 97008 8,836
68 752 51136 4,624
48 963 46224 2,304
862 12,501 9,28,716 64,900
X bar = Total Machine Hours/ Total months
X bar =862/ 12 71.83333333
y bar = Total R & M Cost / Total Months
Y bar = $12501/12 1041.75
Cost Equation = a + b x Machine hours
b = (N?xy ? ?x ?y)/N(?x^2) ? (?x^2
b = (12 x 928716 ? 862 x 12501 )/(12 x 64900)- 862^2) $                     10.31
a = y bar - b x Xbar
a = 1041.75 - (10.31 x 71.83) $                   300.98
Cost Equation = 300.98 + 10.31 x MH
Labour Cost = 300.98 + 10.31x 35units $                   661.91
Labour Cost = 300.98 + 10.31x 90 units $                1,537.58

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