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

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Basic Math

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 3,900
450 4,900
550 5,300
600 5,800
700 6,300
750
6,900
Compute b1and b0 (to 1decimal).
b1
b0

Complete the estimated regression equation (to 1 decimal).
= + x
What is the variable cost per unit produced (to 1 decimal)?
$
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)?
%
The company's production schedule shows 500 units must be producednext month. What is the estimated total cost for this operation (tothe nearest whole number)?
$

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3.9 Ratings (598 Votes)

The statistical software output for this problem is Simple linear regression results Dependent Variable y Independent Variable x y 11466667 76 x Sample size 6 R correlation See Answer

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Production Volume (units)	Total Cost ($)
400	3,900
450	4,900
550	5,300
600	5,800
700	6,300
750	6,900