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Problem 6-42 Continuation of Preceding Problem; Computing Least- Squares Regression Esti-...

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Accounting

Problem 6-42
Continuation of Preceding
Problem; Computing Least-
Squares Regression Esti-
mates; Comparing Multiple
Methods (Appendix)
(L06-1,6-2,6-5,6-6,6-9)
2. Total monthly cost: $9,943
+$.89 per unit of activity
Refer to the original data in the preceding problem for Martha's Vineyard Marine Supply.
Required:
Build a spreadsheet: Construct an Excel spreadsheet and use the Excel commands to perform a least-squares regression. Estimate the variable- and fixed-cost components in the company's material-handling department costs.
Write the least-squares regression equation for the department's costs.
Chapter 6 Activity Analysis, Cost Behavior, and Cost Estimation
'Predict the firm's material-handling department's costs for a month when 2,300 units of activity are recorded.
Why do the three cost predictions computed in this and the preceding problem differ? Which method do you recommend? Why?
Build a spreadsheet: Use your Excel spreadsheet from requirement 1 to compute the R2 value for the regression. Interpret the R2 value.
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