Question

The College of Business at Northeast College is accumulating data as a first step in the preparation of next year's budget development. One cost that is being looked at closely is administrative costs as a function of student credit hours. Data on administrative costs and credit hours for the past thirteen months are shown below:

Month	Administrative Costs				Credit Hours
July		$	129,451		400
August			82,733		193
September			225,670		1,470
October			216,454		1,078
November			258,293		1,387
December			184,599		1,190
January			219,257		1,417
February			245,090		1,451
March			209,522		1,142
April			191,955		1,201
May			250,128		1,438
June			170,538		498
July			128,257		393
Total		$	2,511,947		13,258
Average		$	193,227		1,020

The controller's office has analyzed the data and has given you the results from the regression analysis:

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.9327181
R Square	0.869963033
Adjusted R Square	0.858141490
Standard Error	19,984.60564
Observations	13

ANOVA
	df	SS	MS	F	Significance F
Regression	1	29,391,233,739	29,391,233,739	-73.5913299	3.34292E-06
Residual	11	4,393,229,090	399,384,462.7
Total	12	33,784,462,829

	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	86,208.30382	13,651.03481	6.31514790	5.71542E-05	56,162.57879	116,254.0288	56,162.57879	116,254.0288
X Variable 1	104.9358161	12.23236465	8.578538912	3.34292E-06	78.01256307	131.859069	78.01256307	131.859069

  
Based on the results of the high-low analysis, the estimate of administrative costs in a month with 1,060 credit hours would be: (rounded to the nearest whole dollar)

Answer 1

Variable cost = (Cost at highest activity - Cost at lowest activity) /(Highest activity-Lowest activity)

= (225,670-82,733)/(1470-193)

= 111.93

Fixed cost = Total cost - Variable cost

= 225,670 - (1470*111.93)

= 61,133

Total Cost for 1060 hours

= (1060*111.93) + 61,133

= 179,779 (select the nearest answer)