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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. Total Cost ($) Production Volume (units) 400 3,900 450 4,900 550 5,500 600 6,000 700 6,400 750 7,000 (a) Use these data to develop an estimated regression equation that could be used to predict the total cost for a given production volume. (Round your numerical values to two decimal places.) (b) What is the variable cost (in dollars) per unit produced? 2$ (c) Compute the coefficient of determination. (Round your answer to three decimal places.)

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. Total Cost ($) Production Volume (units) 400 3,900 450 4,900 550 5,500 600 6,000 700 6,400 750 7,000 (a) Use these data to develop an estimated regression equation that could be used to predict the total cost for a given production volume. (Round your numerical values to two decimal places.) (b) What is the variable cost (in dollars) per unit produced? 2$ (c) Compute the coefficient of determination. (Round your answer to three decimal places.)

Linear Algebra: A Modern Introduction
Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter7: Distance And Approximation
Section7.3: Least Squares Approximation
Problem 31EQ
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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 Total Cost (units) ($) 400 3,900 450 4,900 550 5,500 600 6,000 700 6,400 750 7,000 (a) Use these data to develop an estimated regression equation that could be used to predict the total cost for a given production volume. (Round your numerical values to two decimal places.) ý = (b) What is the variable cost (in dollars) per unit produced? $ (c) Compute the coefficient of determination. (Round your answer to three decimal places.) What percentage of the variation in total cost can be explained by production volume? (Round your answer to one decimal place.) (d) The company's production schedule shows 500 units must be produced next month. Predict the total cost (in dollars) for this operation. (Round your answer to the nearest cent.) $
Transcribed Image Text: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 Total Cost (units) ($) 400 3,900 450 4,900 550 5,500 600 6,000 700 6,400 750 7,000 (a) Use these data to develop an estimated regression equation that could be used to predict the total cost for a given production volume. (Round your numerical values to two decimal places.) ý = (b) What is the variable cost (in dollars) per unit produced? $ (c) Compute the coefficient of determination. (Round your answer to three decimal places.) What percentage of the variation in total cost can be explained by production volume? (Round your answer to one decimal place.) (d) The company's production schedule shows 500 units must be produced next month. Predict the total cost (in dollars) for this operation. (Round your answer to the nearest cent.) $
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