Question

Lacourse Incorporated's inspection costs are listed below: Units Produced Inspection Costs January 429 $6,128 February 379...

Lacourse Incorporated's inspection costs are listed below:

Units Produced Inspection Costs
January 429 $6,128
February 379 $5,638
March 448 $6,343
April 463 $6,481
May 405 $5,888
June 380 $5,641
July 455 $6,408
August 406 $5,901

Management believes that inspection cost is a mixed cost that depends on units produced.

Using the least-squares regression method, the estimate of the fixed component of inspection cost per month is closest to:

Multiple Choice

  • $1,815

  • $1,773

  • $5,638

  • $5,827

Business   Accounting   
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Answer #1
Units (x) Inspection costs (y) xy x^2
January 429 6128 2628912 184041
February 379 5638 2136802 143641
March 448 6343 2841664 200704
April 463 6481 3000703 214369
May 405 5888 2384640 164025
June 380 5641 2143580 144400
July 455 6408 2915640 207025
August 406 5901 2395806 164836
3365 48428 20447747 1423041
b = n∑xy-(∑x)(∑y)/n∑x^2-(∑x^2)
b = 8*20447747-(3365)(48428)/8*1423041-(3365)^2
= 621756/61103
= 10.18
Fixed cost=a
a= ∑y-b∑x/n
= (48428-10.18*3365)/8
= 1771.5375

1771.53 is closest to 1773 so $1773 is the correct answer

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