On November 15, 2009, Sandra Cook, a newly hired cost analyst at Demgren Company, was asked to predict overhead costs for the company's operations in 2010 when 530 unites are expected to be produced. She collected the following quarterly data:
Quarter Production In Units Overhead Costs
1/06 73 $715
2/06 76 709
3/06 68 640
4/06 133 1,124
1/07 122 995
2/07 125 1,105
3/07 122 1,113
4/07 130 1,036
1/08 121 982
2/08 126 1,060
3/08 112 990
4/08 81 951
1/09 81 829
2/09 119 1,044
3/09 87 982
1) Using the high-low method to estimate costs, prepare a prediction of overhead costs for 2010
2) Sandy ran a regressin analysis using the data she collected. The result was
Y = $347 + $5.76X
Using this cost function, predict overhead costs for 2010
3) Which prediction do you prefer? Why?