Cost Behavior and Correlation Analysis PC's total maintenance cost for the past 10 months is Php50,000.00. Some of the maintenance activity appears related to the operation of machinery, and the accountant wants to determine whether machine hours should be used as a basis upon which to estimate maintenance cost at various levels of capacity. Machine hours for the same period totalled 40,000 hours. The machine hour differences from average multiplied by the maintenance cost differences from its average and summed E(x¡ – x)Vi – y) is 2,400. The machine hour differences from average squared and summed E(xi – x)² is 6,250, and the maintenance cost differences from average squared and summed E(y; - y)? is 1,000. Required: 1. Compute the coefficient of correlation, r, and the coefficient of determination,r², for maintenance cost and machine hours.
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
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