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 4000 450 5000 550 5400 600 5900 700 6400 750 7000 Use these data to develop an estimated regression Equation that could be used to predict the total cost for a given production volume. What is the variable Cost per unit produced? Compute the coefficient of determination. What percentage of the variation in total cost can be explained by production volume? The company's production schedule shows 500 untis must be produced next month. Predict the total cost for this operation. Where data on production volume and cost were used to develop an estimated regression equation relating production volume and cost for a particular manufacturing operation. Use Alpha= 0.05 to test whether the production volume is significantly related to the total cost. Show the ANOVA table. What is your conclusion?

Functions and Change: A Modeling Approach to College Algebra (MindTap Course List)

6th Edition

ISBN:9781337111348

Author:Bruce Crauder, Benny Evans, Alan Noell

Publisher:Bruce Crauder, Benny Evans, Alan Noell

Chapter3: Straight Lines And Linear Functions

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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 (Units)	Total Cost ($)
400	4000
450	5000
550	5400
600	5900
700	6400
750	7000

Use these data to develop an estimated regression Equation that could be used to predict the total cost for a given production volume.

What is the variable Cost per unit produced?

Compute the coefficient of determination. What percentage of the variation in total cost can be explained by production volume?

The company's production schedule shows 500 untis must be produced next month. Predict the total cost for this operation.

Where data on production volume and cost were used to develop an estimated regression equation relating production volume and cost for a particular manufacturing operation. Use Alpha= 0.05 to test whether the production volume is significantly related to the total cost. Show the ANOVA table. What is your conclusion?

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