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

50.1K

Verified Solution

Question

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 7 production volumes andtotal cost data for a manufacturing operation.
Production Volume (units)
Total Cost ($)
400
4000
450
5000
550
5400
600
5900
700
6400
750
7800
800
7200
Use these data to estimate a regression equation that could beused to predict the total cost for a given production volume.Intercept and Slope
What is the marginal cost per unit produced? (Remember whatmarginal cost is from Principle of Economics?)
The companyâ€™s production schedule shows 500 units must beproduced next month. What is the estimated total cost for thisoperation?

Answer & Explanation Solved by verified expert

4.4 Ratings (866 Votes)

Data based on a sample of 7 production volumes and total costfor manufacturing operation is given In this case volume isindependent variable and cost is dependent variable Let x denotethe volume and y denote the total cost Then See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Production Volume (units)	Total Cost ($)
400	4000
450	5000
550	5400
600	5900
700	6400
750	7800
800	7200