Week Units Total Etching Cost 1... $ 18 2.. 3 17 3.. 25 4.. 20 5... 24 6.. 2 16 30 $120
Least-Squares Regression
George Caloz & Frères, located in Grenchen, Switzerland, makes luxury custom watches in small lots. One of the company’s products, a platinum diving watch, goes through an etching process. The company has recorded etching costs as follows over the last six weeks:
For planning purposes, management would like to know the variable etching cost per unit and the total fixed etching cost per week.
Required:
1. Prepare a scattergraph plot. (Plot etching costs on the vertical axis and units on the horizontal axis.)
2. Using the least-squares regression method, estimate the variable etching cost per unit and the total fixed etching cost per week. Express these estimates in the form Y = a + bX.
3. If the company processes five units next week, what would be the expected total etching cost? (Round your answer to the nearest cent.)
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