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The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed. The costs must be broken into their fixed and variable elements so that the cost behavior of the power usage activity can be properly described. Machine hours have been selected as the activity driver for power costs. The following data for the past 8 quarters have been collected:

Quarter	Machine Hours	Power Cost
1	20,000	$26,000
2	25,000	38,000
3	30,000	42,500
4	22,000	37,000
5	21,000	34,000
6	18,000	29,000
7	24,000	36,000
8	28,000	40,000

Note: For the following requirements, round the fixed cost to the nearest dollar, round the variable rates to three decimal places, and the R² to two decimal places.

Use the method of least squares to compute a power cost formula. Evaluate the coefficient of determination.

Line Item Description	Answer
Variable rate (to three decimal places)	$fill in the blank
Fixed cost (to the nearest dollar)	$fill in the blank
Coefficient of determination (R2) (round to two decimals, input as a percentage)	fill in the blank

4. Conceptual Connection: Rerun the regression, and drop the point (20,000, $26,000) as an outlier. Compare the results from this regression to those for the regression in Requirement 3. Which is better?

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