Month Overhead Cost $ Output (Units) Direct Material Cost $

Y X X
1 82 20 40
2 70 16 35
3 90 24 50
4 85 22 46
5 73 18 38

Required:-
1 Correlation of cost with each base/activity, i.e. Output, Direct Material Cost, Direct Labor Cost, Prime Cost, Direct La

r= n∑XY - ∑X∑Y Remember answer should be from -1 to +1

([n∑X -(∑X) ][n∑Y -(∑X) ])^
2 2 2 2 0.5

2 Based on your result, sugguest base/activity for overhead application rate.

3 Calculate an equation to determine the expected cost level for any given output volume.

b= n∑XY - ∑X∑Y
([n∑X2-(∑X)2])^0.5

a= Ῡ-bX

4 a Prepare a budget for overhead cost if output is 30 units

b Prepare a budget for overhead cost if Direct Material Cost is $60
c Prepare a budget for overhead cost if Direct Labor Cost is $40
d Prepare a budget for overhead cost if Prime Cost is $90
e Prepare a budget for overhead cost if Direct Labor Hours are 4
f Prepare a budget for overhead cost if Machine Hours are 5
 Direct Labor Cost $ Prime Cost $ Direct Labor Hours Machine Hours
X X X X
30 70 3.0 4.0
25 60 2.5 3.2
45 95 4.5 4.8
28 74 2.8 4.4
25 63 2.5 3.6

ect Labor Cost, Prime Cost, Direct Labor Hours and Machine Hours (using following forumula)
Month Overhead Cost $ Output (Units)
Y X XY x^2
1 82 20 1,640 400
2 70 16 1,120 256
3 90 24 2,160 576
4 85 22 1,870 484
5 73 18 1,314 324
5 400 100 8,104 2,040

r= n∑XY - ∑X∑Y
([n∑X2-(∑X)2][n∑Y2-(∑Y)2])^0.5

520
527

0.99
Y^2
6,724
4,900
8,100
7,225
5,329
32,278
Month Overhead Cost $ Direct Material Cost $
Y X XY x^2
1 82 40 3,280 1600
2 70 35 2,450 1225
3 90 50 4,500 2500
4 85 46 3,910 2116
5 73 38 2,774 1444
5 400 209 16,914 8,885

r= n∑XY - ∑X∑Y
([n∑X2-(∑X)2][n∑Y2-(∑Y)2])^0.5

970
1,017

0.95
Y^2
6,724
4,900
8,100
7,225
5,329
32,278
Month Overhead Cost $ Direct Labor Cost $
Y X XY x^2
1 82 30 2,460 900
2 70 25 1,750 625
3 90 45 4,050 2025
4 85 28 2,380 784
5 73 25 1,825 625
5 400 153 12,465 4,959

r= n∑XY - ∑X∑Y
([n∑X2-(∑X)2][n∑Y2-(∑Y)2])^0.5

1,125
1,388

0.81
Y^2
6,724
4,900
8,100
7,225
5,329
32,278
Month Overhead Cost $ Prime Cost $
Y X XY x^2
1 82 70 5,740 4900
2 70 60 4,200 3600
3 90 95 8,550 9025
4 85 74 6,290 5476
5 73 63 4,599 3969
5 400 362 29,379 26,970

r= n∑XY - ∑X∑Y
([n∑X2-(∑X)2][n∑Y2-(∑Y)2])^0.5

2,095
2,300

0.91
Y^2
6,724
4,900
8,100
7,225
5,329
32,278
Month Overhead Cost $ Direct Labor Hours
Y X XY x^2
1 82 3.0 246 9
2 70 2.5 175 6.25
3 90 3.7 333 13.69
4 85 3.4 289 11.56
5 73 2.8 204 7.84
5 400 15.4 1,247 48

r= n∑XY - ∑X∑Y
([n∑X2-(∑X)2][n∑Y2-(∑Y)2])^0.5

77
79

0.97
Y^2
6,724
4,900
8,100
7,225
5,329
32,278
Month Overhead Cost $ Machine Hours
Y X XY x^2
1 82 4 328 16
2 70 3 210 9
3 90 4.6 414 21.16
4 85 4.2 357 17.64
5 73 3.4 248 11.56
5 400 19.2 1,557 75

r= n∑XY - ∑X∑Y
([n∑X2-(∑X)2][n∑Y2-(∑Y)2])^0.5
∑
106
107

1.00
Y^2
6,724
4,900
8,100
7,225
5,329
32,278