An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression...


An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing volume. Consider the following sample of production volumes and total cost data for a manufacturing operation.




































Production Volume (units)

Total Cost ($)
4004,200
4505,200
5505,600
6006,100
7006,600
7507,200


  1. Computeb
    1 andb
    0 (to 1 decimal).

    b
    1

    b
    0


    Complete the estimated regression equation (to 1 decimal).
     =   +x





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




  3. Compute the coefficient of determination (to 3 decimals). Note: reportr
    2 between 0 and 1.

    r
    2 =


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



Jun 06, 2022
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