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 ($) 400 450 550 600 700 750 3,900 4,900 5,300 5,800 6,300 6,900 a. Compute b1 and bo (to 1 decimal). 1 0 Complete the estimated regression equation (to 1 decimal). b. What is the variable cost per unit produced (to 1 decimal)? C. Compute the coefficient of determination (to 3 decimals). Note: report r between 0 and 1 What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)? 0 d. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)?

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
450
550
600
700
750
3,900
4,900
5,300
5,800
6,300
6,900
a. Compute b1 and bo (to 1 decimal).
1
0
Complete the estimated regression equation (to 1 decimal).
b. What is the variable cost per unit produced (to 1 decimal)?
C. Compute the coefficient of determination (to 3 decimals). Note: report r between 0 and 1
What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)?
0
d. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)?

Image Transcription

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 ($) 400 450 550 600 700 750 3,900 4,900 5,300 5,800 6,300 6,900 a. Compute b1 and bo (to 1 decimal). 1 0 Complete the estimated regression equation (to 1 decimal). b. What is the variable cost per unit produced (to 1 decimal)? C. Compute the coefficient of determination (to 3 decimals). Note: report r between 0 and 1 What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)? 0 d. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)?

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