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A.	Prepare an overhead cost breakdown by using the high-low method. The analysis should be useful in helping to predict variable and fixed costs under normal operating conditions.
B.	Prepare an estimate of overhead cost for a volume of 3,000 machine hours by using regression no. 1.
C.	You now have the ability to analyze three cost estimates from the high-low data in part (a) and the two regression equations. Which one do you feel would provide the best estimate? Explain the factors that support your choice. Note: Do not calculate an overhead cost estimate with regression no. 2.

Managers in the Stamping Department have been studying overhead cost and its relationship with machine hours. Data from the most recent 12 months follows. Machine Month+' . Overhead- e Hours- January+' $5,030+' 2,730., February., 1,600+'+' 600+' March* April- May une July August5,570 2,411 September-e 7,728- 3,960- October5,810 2,897- November- 4,580+'+' 2'207+' December- 6,010+'+' 2,864- +' +' +' 7,210- * 3,403 4,560 2,200 6,88042 3,411- +' 6,520- 2,586 6,23042 3,364- +' The manager of the department has requested a regression analysis of these two variables (labeled no. 1 below). However, the staff person performing the analysis decided to run another regression that excluded February (labeled no. 2). She observed that the volume of activity was very low for that month because of two factors: a severe flu outbreak and an electrical fire that disrupted operations for about 10 working days. ~- Regression No. 1' Constant * Regression No. 2 42800+' Constant- 0.79 R2 1.86 b coefficient 550.00 0.74 1.90 b coefficient

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