The Feline Company Has Been Having Some Difficulties Estimating Its

The Feline Company has been having some difficulties estimating its manufacturing overhead costs.In the past,manufacturing overhead costs have been related to production levels.However,some production managers have indicated that the size of their production lots might also be having an impact on the amount of their monthly manufacturing overhead costs.In order to investigate this possibility,the company collected information on its monthly manufacturing overhead costs,production in units,and average production lot size for 2016.
$$\begin{array} { | c | r | r | c | } \hline \text { Month } & \begin{array} { r } \text { Production } \\\text { (Units) }\end{array} & \begin{array} { r } \text { Manufacturing } \\\text { Ovenead Cost }\end{array} & \begin{array} { c } \text { Average Monthly } \\\text { Production Lot Size }\end{array} \\\hline 1 & 75,000 & \$ 925,800 & 20 \\\hline 2 & 90,000 & 843,875 & 19 \\\hline 3 & 65,000 & 910,125 & 24 \\\hline 4 & 80,000 & 946,000 & 19 \\\hline 5 & 55,000 & 879,000 & 24 \\\hline 6 & 50,000 & 825,000 & 18 \\\hline 7 & 85,000 & 960,000 & 22 \\\hline 8 & 105,000 & 1,053,500 & 25 \\\hline 9 & 102,000 & 1,020,000 & 23 \\\hline 10 & 68,000 & 905,000 & 20 \\\hline 11 & 75,000 & 938,000 & 22 \\\hline 12 & 95,000 & 995,000 & 24 \\\hline\end{array}$$
Regression analysis results of the information presented above are as follows:
Ordinary regression:

$$\begin{array} { | l | l | } \hline \text { Equation: } & \$ 691,741 + \$ 3.0692 \times \text { units } \\\hline \text { r-square: } & .628 \\\hline\end{array}$$
Multiple regression:
$$\begin{array} { | l | l | } \hline \text { Equation: } & \$482,172 + \$2.4918 \times \text { units } +\$11,770.939 \times \text {lot size} \\\hline \text { r-square: } & .777 \\\hline\end{array}$$
Required:
(a. )Use the results from the ordinary regression and estimate next month's manufacturing overhead costs,assuming the company is planning to produce 92,000 units.(final answer should be rounded to the nearest whole dollar)
(b. )Use the results from the multiple regression and estimate the next month's manufacturing costs,assuming the company is planning to produce 92,000 units with an average lot size of 21.(final answer should be rounded to the nearest whole dollar)
(c. )Comment on which regression seems to be more appropriate under these circumstances.What additional information would you like to see? Be specific.

Correct Answer:

Verified

(a. )$974,107
(b. )$958,606
(c. )The mul...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

View Full Answer For Free