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An important application of regression analysis in accounting is in the estimation of cost. By collecting...

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Statistics

An important application of regression analysis in accounting isin the estimation of cost. By collecting data on volume and costand using the least squares method to develop an estimatedregression equation relating volume and cost, an accountant canestimate the cost associated with a particular manufacturingvolume. Consider the following sample of production volumes andtotal cost data for a manufacturing operation.

Production Volume (units) Total Cost ($)

400 4,900

450 5,900

550 6,300

600 6,800

700 7,300

750 7,900

Compute b1 and b0 (to 1 decimal). b1 b0 Complete the estimatedregression equation (to 1 decimal). Å· = + x

What is the variable cost per unit produced (to 1 decimal)?

Compute the coefficient of determination (to 3 decimals). Note:report r2 between 0 and 1. r2 =

What percentage of the variation in total cost can be explainedby the production volume (to 1 decimal)? %

The company's production schedule shows 500 units must beproduced next month.

What is the estimated total cost for this operation (to thenearest whole number)? $

Answer & Explanation Solved by verified expert
3.7 Ratings (575 Votes)
Total Cost 21467 76 ProductionVolume2 What is the variable cost per unit produced to 1decimalThe    See Answer
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