- The managing director of a consulting group has the following monthly data on total overhead costs and professional labor hours to bill to clients:
| OverheadCosts | BillableHours |
|---|---|
| $365,000 | 3,000 |
| $400,000 | 4,000 |
| $430,000 | 5,000 |
| $477,000 | 6,000 |
| $560,000 | 7,000 |
| $587,000 | 8,000 |
- a) Develop a trendline to identify the relationship between billable hours and overhead costs.
- b) Interpret the coefficients of your regression model. Specifically, what does the fixed component of the model mean to the consulting firm?
- c) If a special job requiring 1,000 billable hours that would contribute a margin of $38,000 before overhead was available, would the job be attractive?
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