Linda Olson has been asked to prepare a bid for a 20-child birthday party to be given next month. Determine the minimum bid price that Linda would be willing to submit to recoup variable costs.
Extracted text: Linda Olson owns a professional char- acter business in a large metropolitan area. She hires local college students to play these characters at children's parties and other events. Linda provides balloons, cupcakes, and punch. For a standard party the cost on a per-person basis is as follows: Balloons, cupcakes, and punch Labor (0.25 hour x $20 per hour) Overhead (0.25 hour x $40 per hour) Total cost per person 10 $22 Linda is quite certain about the estimates of the materials and labor costs, but is not as comfortable with the overhead estimate. The overhead estimate was based on the actual data for the past 9 months, which
Extracted text: are presented here. These data indicate that overhead costs vary with the direct labor-hours used. The $40 estimate was determined by dividing total overhead costs for the 9 months by total labor-hours. Month April May Labor-Hours Overhead Costs $ 65,000 1,400 1,800 2,100 2,200 71,000 73,000 76,000 67,000 68,000 66,500 60,000 June July August September October 1,650 1,725 1,500 1,200 November December 1,900 15,475 72,500 $619,000 Total Linda has recently become aware of regression analysis. She estimated the following regression equation with overhead costs as the dependent variable and labor-hours as the independent variable: y = $43,563 + $14.66X