QMHomework - 1. The management of Wheeler Company has...

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1. The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. They have debated whether the power cost should be treated as fixed, variable, or both. Using the following data you are charged to settle this issue and determine the best cost formula for Wheeler. Quarter Machine Hrs Power Cost 1 20000 26000 2 25000 38000 3 30000 42500 4 22000 37000 5 21000 34000 6 18000 29000 7 24000 36000 8 28000 40000 a. Find the estimated fixed cost associated with the machine hours. Estimate = sum machine hrs / amount of quarters. = 188000 / 8 Estimate fixed cost = 23500 b. Find the estimated variable cost associated with the machine hours. c. Discuss your confidence in the use of these estimates. d. Would you recommend using this cost function? Explain. Machine HrsPower Cost Machine Hr 1 Power Cos 0.89336 1 1 2 3 4 5 6 7 8 0 10000 20000 30000 40000 Machine Hrs. Linear Regression for Machine Hrs.
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This note was uploaded on 12/02/2011 for the course QM 670 taught by Professor Dr.keeney during the Fall '11 term at Jefferson College.

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QMHomework - 1. The management of Wheeler Company has...

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