Question

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 ($) 400 4,000 450 5,000 550 5,400 600 5,900 700 6,400 750 7,000 a. Compute b1 and bo (to 1 decimal).(need help) 7.6 +1346.7 Complete the estimated regression equation (to 1 decimal). 1346.7 (need help) 7.6 b. What is the variable cost per unit produced (to 1 decimal)? 7.6 c. Compute the coefficient of determination (to 3 decimals). Note: report between and r2= . 0.959 What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)? 95.9 d. The company's production schedule shows units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)? 5146.7 (need help)

Answer 1

	Volume (X)	Cost (Y)	X * Y	X2	Y2
	400	4000	1600000	160000	16000000
	450	5000	2250000	202500	25000000
	550	5400	2970000	302500	29160000
	600	5900	3540000	360000	34810000
	700	6400	4480000	490000	40960000
	750	7000	5250000	562500	49000000
Total	3450	33700	20090000	2077500	1.95E+08

b1 = 7.6

b0 =( Σ Y - ( b * Σ X) ) / n
b0 =( 33700 - ( 7.6 * 3450 ) ) / 6
b0 = 1246.667

Equation of regression line becomes Ŷ = 1246.6667 + 7.6X

The variable cost per unit produced is $7.6

r = 0.979

Coefficient of Determination
R2 = r2 = 0.959

Explained variation = 0.959* 100 = 95.9%

When X = 5146.7
Ŷ = 1246.667 + 7.6 X
Ŷ = 1246.667 + ( 7.6 * 5146.7 )
Ŷ = 40361.59