A company would like to estimate its total cost equation usingcustomer records.  The company has randomly sampled 28customer records. Each customer record contains a Customer #, theOrder Size, and the Total Cost of the Order.  The analystremembers from accounting and economics classes taken in collegethat
TOTAL COST = Fixed Costs + Variable Cost per Unit *OrderSize.
The analysis sees that this is a linear relationship where theTOTAL COST depends on the Fixed Costs, which do not depend on ordersize, and a variable cost per unit, which is multiplied by theOrder Size.  The analysis decides to use simple linearregression to estimate the firm’s Total Costfunction.  Use the data file, Estimating aTotal Cost Regression Model.xlsx to answer thefollowing questions:
- What is the dependent variable in this analysis? What is theindependent variable in this analysis?
- Use excel to estimate the regression model.  Statethe estimated total cost function.
- What is the estimated Fixed Cost for the Company? Remember thefixed costs is independent of output. You can estimate it as theTotal Cost when output is “0â€. (Look at the regression outputproduced by Excel for part b.)
- What is the estimated average unit variable cost for theCompany? (Look at the regression output produced by Excel for partb.)
| Customer # | Order Size (Quantity) | Total Cost of Order |
| 10211 | 28 | 1631 |
| 10212 | 31 | 1923 |
| 10213 | 43 | 2070 |
| 10214 | 47 | 2392 |
| 10215 | 32 | 1886 |
| 10216 | 43 | 2307 |
| 10217 | 25 | 1486 |
| 10218 | 46 | 2448 |
| 10219 | 41 | 2210 |
| 10220 | 48 | 2401 |
| 10221 | 29 | 1860 |
| 10222 | 32 | 1786 |
| 10223 | 49 | 2485 |
| 10224 | 44 | 2203 |
| 10225 | 33 | 1855 |
| 10226 | 46 | 2380 |
| 10227 | 42 | 2102 |
| 10228 | 31 | 1683 |
| 10229 | 30 | 1706 |
| 10230 | 35 | 1955 |
| 10231 | 34 | 1992 |
| 10232 | 33 | 1926 |
| 10233 | 27 | 1852 |
| 10234 | 32 | 1807 |
| 10235 | 31 | 1880 |
| 10236 | 42 | 2134 |
| 10237 | 39 | 1979 |
| 10238 | 36 | 1882 |
