Prepare a scattergraph plot. (Place total cost on the vertical axis and number of sections offered on the horizontal axis.) Using the least-squares regression method, estimate the variable cost per section and the total fixed cost per term for Finance 101. (In the calculation, round your fixed cost and variable cost to nearest whole dollars.) 2(b). Express these estimates in the linear equation form Y = a + bX. 3a. Assume that because of the small number of sections offered during the Winter Term this year, Professor Morton will have to offer nine sections of Finance 101 during the Fall Term. Compute the fixed, variable, and expected total costs for Finance 101.
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Professor John Morton has just been appointed chairperson of the Finance Department at Westland University. In reviewing the department’s cost records, Professor Morton has found the following total cost associated with Finance 101 over the last several terms: |
| Term | Number of Sections Offered |
Total Cost | |||
| Fall, last year | 4 | $ | 11,000 | ||
| Winter, last year | 2 | $ | 6,000 | ||
| Summer, last year | 5 | $ | 11,500 | ||
| Fall, this year | 3 | $ | 7,500 | ||
| Winter, this year | 7 | $ | 12,000 | ||
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Professor Morton knows that there are some variable costs, such as amounts paid to graduate assistants, associated with the course. He would like to have the variable and fixed costs separated for planning purposes. |
| Required: | |
| 1. | Prepare a scattergraph plot. (Place total cost on the vertical axis and number of sections offered on the horizontal axis.) |
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Using the least-squares regression method, estimate the variable cost per section and the total fixed cost per term for Finance 101. (In the calculation, round your fixed cost and variable cost to nearest whole dollars.) |
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| 2(b). |
Express these estimates in the linear equation form Y = a + bX. |
| 3a. |
Assume that because of the small number of sections offered during the Winter Term this year, Professor Morton will have to offer nine sections of Finance 101 during the Fall Term. Compute the fixed, variable, and expected total costs for Finance 101. (Round your final answer to nearest whole dollar.) |
| 3b. | Can you see any problem with using the cost formula from (2) above to derive this total cost figure? |
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Choose the BEST answer from the following choices: |
multiple choice
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Prediction is out of the relevant
range . -
Coefficient estimates may have high variance.
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Prediction is based on old data.
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Prediction is not guaranteed to become actual.
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