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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 ($)
4004,500
4505,500
5505,900
6006,400
7006,900
7507,500
  1. Compute b1 and b0 (to 1decimal).
    b1  
    b0  

    Complete the estimated regression equation (to 1 decimal).
    =  +  x
  2. What is the variable cost per unit produced (to 1decimal)?
    $
  3. Compute the coefficient of determination (to 3 decimals). Note:report r2between 0 and 1.
    r2 =  

    What percentage of the variation in total cost can be explained bythe production volume (to 1 decimal)?
    %
  4. The company's production schedule shows 500 units must beproduced next month. What is the estimated total cost for thisoperation (to the nearest whole number)?
    $

Answer & Explanation Solved by verified expert
4.4 Ratings (1014 Votes)
a Sum of X 3450Sum of Y 36700Mean X 575Mean Y 61166667Sum of squares SSX 93750Sum of products    See Answer
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