The controller of Chittenango Chain Company believes that the identification of the variable and fixed components of the

[answerhappygod]

The controller of Chittenango Chain Company believes that the
identification of the variable and fixed components of the firm’s
costs will enable the firm to make better planning and control
decisions. Among the costs the controller is concerned about is the
behavior of indirect-materials cost. She believes there is a
correlation between machine hours and the amount of indirect
materials used.

A member of the controller’s staff has suggested that least-squares
regression be used to determine the cost behavior of indirect
materials. The regression equation shown below was developed from
40 pairs of observations.

S = $200 + $4H
To determine the validity of the cost estimate computed in
requirement 2, what question(s) would you ask the controller about
the data used for the regression?
Which of the following questions would you ask (can be more than
1)
The high and low activity levels during the past four years, as
measured by machine hours, occurred during April and August,
respectively. Data concerning machine hours and indirect-material
usage follow.
Determine the cost of indirect materials used during April and
August.
Use the high-low method to estimate the behavior of the
company’s indirect-material cost. Express the cost behavior pattern
in equation form.
Indirect material cost = ? + ? per machine hour