# XYZ Company uses the formula y = a + bX to predict and analyze overhead costs. In the previous year, 1 answer below »

XYZ Company uses the formula y = a + bX to predict and analyze overhead costs. In the previous year, XYZ used \$1,750 per month for the a factor and \$.35 for the b factor in applying overhead. XYZ has used direct labour hours in the past, but is wondering whether overhead behaviour is more closely associated with machine hours. The following data have been generated for consideration: Month………. Machine Hours……….. Overhead Costs 1 …………………………….425…………………. \$2,525 2 …………………………….460…………………. \$2,961 3 …………………………….4100………………… \$2,484 4 ……………………………..480 …………………\$2,649 5 ……………………………..502………………… \$2,705 6 ……………………………..418………………… \$2,496 Instructions (a) Determine the fixed and variable values, using machine hours. (b) If it is expected that the company will incur 850 machine hours in the coming month, predict that month s overhead costs. (c) For April of the coming year, XYZ expects 3,150 direct labour hours and 492 machine hours. Predict overhead costs using (1) direct labour hours and (2) machine hours. (d) If April s actual fixed overhead costs are \$1,525 and actual variable overhead costs are \$1,200, which activity base appears better