Velman Company wants to determine the factors that are associated with overhead. The controller… 1 answer below »

Velman Company wants to determine the factors that are associated with overhead. The controller for Velman constructed a multiple regression equation using the fol- lowing independent variables: direct labor hours, number of setups, and number of purchase orders. The analysis was run using the past 60 months of data. The follow- ing printout is obtained: Standard

   

Parameter  

Estimate

t for Ho Parameter = 0  

Pr > t Error of

Parameter

Intercept

2,130

65.00

0.0001

225.000

Direct labor hours

17

3.17

0.0050

3.256

Number of setups

810

4.90

0.0050

108.256

Number of

 

 

 

 

purchase orders

26

7.96

0.0250

5.103

R2 = 0.95

Se = 150

Observations 60

  Required

1.    Write out the cost formula for monthly overhead for Velman Company.

2.    If Velman budgets the following for next month, what is the budgeted overhead cost?

 

Direct labor hours

600

Number of setups

50

Number of purchase orders

120

3.    Suppose that Velman’s engineers found a way to reduce the number of setups by 50 percent. How much would be saved in overhead cost for the following month?

 

 

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