An important application of regression analysis in accounting is in the estimati

Question

An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing volume. Consider the following sample of production volumes and total cost data for a manufacturing operation.

Compute b1 and b0 (to 1 decimal).
b1  
b0  

Complete the estimated regression equation (to 1 decimal).
= ______ + ________x

What is the variable cost per unit produced (to 1 decimal)?

Compute the coefficient of determination (to 3 decimals). Note: report r2 between 0 and 1.
r2 = ________

What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)?
_____ %

The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)?
$ ________

Production Volume (units) Total Cost ($) 400 4,500 450 5,500 550 5,900 600 6,400 700 6,900 750 7,500

Explanation / Answer

An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing volume. Consider the following sample of production volumes and total cost data for a manufacturing operation.

Compute b1 and b0 (to 1 decimal).
b1  
b0  

Complete the estimated regression equation (to 1 decimal).
= ______ + ________x

What is the variable cost per unit produced (to 1 decimal)?

Compute the coefficient of determination (to 3 decimals). Note: report r2 between 0 and 1.
r2 = ________

What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)?
_____ %

The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)?
$ ________

Production Volume (units) Total Cost ($) 400 4,500 450 5,500 550 5,900 600 6,400 700 6,900 750 7,500

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.