The Knapp Company needs to predict the labor cost in producing small carrot patch dolls. The following production information is available:
|
Year
|
Dolls Produced
|
Labor Hours
|
Labor Dollars
|
|
2005
|
1,150
|
850
|
$17,000
|
|
2006
|
1,600
|
975
|
23,400
|
|
2007
|
1,100
|
800
|
25,600
|
|
2008
|
2,100
|
1,150
|
36,800
|
|
2009
|
1,500
|
950
|
34,200
|
|
2010
|
1,300
|
875
|
35,000
|
The technology has not changed since 2005. Wage rates have steadily increased since 2005; however, management expects no further wage increases in 2011.
Required:
- Select the appropriate independent variable for predicting labor cost. Explain the reason for your selection.
- Develop an equation to predict for 2011 the labor cost of producing carrot patch dolls. Use the high-low method.
- Estimate the labor cost of producing 3000 carrot patch dolls for 2011 if 3,000 dolls are expected to produce.