The president of a small manufacturing firm is concerned about the continual inc

Question

The president of a small manufacturing firm is concerned about the continual increase in manufacturing costs over the past several years. The following figures provide a time series of the cost per unit for the firm's leading product over the past eight years. Click on the datafile logo to reference the data DATA Year Cost/Unit ($) Year Cost/Unit ($) 20.00 24.50 28.20 27.50 26.60 30.00 31.00 36.00 8 (a) Choose the correct time series plot. 8 S3500 Year ( Year () (i 55.0 (iv)s1500 2 10.00 10 00 Year( Plot (ii) What type of pattern exists in the data? Trend Pattern (b) Use simple linear regression analysis to find the parameters for the line that minimizes MSE for this time series. If required, round your answers to two decimal places. y-intercept, bo = 19.99 Slope, b MSE 3.89 1= 1.77 (c) What is the average cost increase that the firm has been realizing per year? Round your interim computations and final answer to two decimal places (d) Compute an estimate of the cost/unit for next year If required, round your answer to two decimal places. $35.92

Explanation / Answer

Estimated is calculated by using y' = b0 + b1x

= 19.9929 + 1.7738x

MSE = summation of ( Y-Y')^2 / n

MSE = 2.9183

X Y Estimated(Y') Y - Y' (Y - Y')^2 1 20 21.76667 -1.76667 3.121111 2 24.5 23.54048 0.959524 0.920686 3 28.2 25.31429 2.885714 8.327347 4 27.5 27.0881 0.411905 0.169666 5 26.6 28.8619 -2.2619 5.116213 6 30 30.63571 -0.63571 0.404133 7 31 32.40952 -1.40952 1.986757 8 36 34.18333 1.816667 3.300278

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