2 Use the least squares regression method to estimate the fixed and variable

# 2 use the least squares regression method to estimate

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2. Use the least-squares regression method to estimate the fixed and variable components of overhead expenses. 3. Estimate the contribution to profit of a standard 120-guest cocktail party if Lee charges her usual price of \$45 per guest. (In other words, by how much would her overall profit increase?) 4. How low could Lee bid for the charity event, in terms of a price per guest, and still not lose money on the event itself? 5. The individual who is organizing the charity’s fund-raising event has indicated that he has already received a bid under \$42 from another catering company. Do you think Lee should bid below her normal \$45 per guest price for the charity event? Why or why not? (CMA, adapted) overhead cost per labor-hour was determined by dividing total overhead expenses for the last 12 months by total labor-hours for the same period. Monthly data concerning overhead costs and labor-hours appear below: Month Labor Hours Overhead Expenses January . . . . . . . . . . . . . . . . 1,500 \$ 44,000 February . . . . . . . . . . . . . . . 1,680 47,200 March . . . . . . . . . . . . . . . . . 1,800 48,000 April . . . . . . . . . . . . . . . . . . . 2,520 51,200 May . . . . . . . . . . . . . . . . . . . 2,700 53,600 June . . . . . . . . . . . . . . . . . . 3,300 56,800 July . . . . . . . . . . . . . . . . . . 3,900 59,200 August . . . . . . . . . . . . . . . . . 4,500 61,600 September . . . . . . . . . . . . . 4,200 60,000 October . . . . . . . . . . . . . . . . 2,700 54,400 November . . . . . . . . . . . . . . 1,860 49,600 December . . . . . . . . . . . . . . 3,900 58,400 Total . . . . . . . . . . . . . . . . . . 34,560 \$644,000 nor25427_ch02_021-069.indd 69 24/08/12 1:03 PM

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