Production volume
400
450
550
600
700
750
Total cost
4000
5000
5400
5900
6400
7000
An important application of regression analysis in accounting
is in the estimation of cost....
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Production volume
400
450
550
600
700
750
Total cost
4000
5000
5400
5900
6400
7000
An important application of regression analysis in accountingis in the estimation of cost. By collecting data on volume and costand using the least squares method to develop an estimatedregression equation relating volume and cost, an accountant canestimate the cost associated with a particular manufacturingvolume. Consider the following sample of production volumes andtotal cost data for a manufacturing operation.
Excel File: data12-21.xls
Compute b1 and b0 (to 2decimals if necessary). b1 b0
Complete the estimated regression equation (to 2 decimals ifnecessary). Å· =Â Â +Â Â x
What is the variable cost per unit produced (to 1decimal)?
Compute the coefficient of determination (to 4 decimals). Note:report r2 between 0 and 1. r2 =
What percentage of the variation in total cost can be explained bythe production volume (to 2 decimals)? %
The company's production schedule shows 500 units must beproduced next month. What is the estimated total cost for thisoperation (to 2 decimals)? $
Answer & Explanation
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4.3 Ratings (591 Votes)
AnswerHere let y is total cost and x is production volumeFirst enter the given data in excelProductionVolumexTotal costy400400045050005505400600590070064007507000To use the regression analysis in excel use the followingpathData Data Analysis upper right corner selectRegression select range both x and y variables Give outputrange OKThe output as belowSUMMARY
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