Company X is trying to estimate future inspection fees based on prior experience

Question

Company X is trying to estimate future inspection fees based on prior experience. You (the accountant) requested and gathered from various managers the number of orders received each week,

the average weight of each order, and the average cost of each order. You then compared this data to the actual inspection fees incurred. The data is summarized below:

Regression

Independent variable with the highest coefficient of determination is:

New Cost equation is:

New estimate for week 16 using new cost equation:

Compare results to earlier prediction using high/low method:

Company X is trying to estimate future inspection fees based on prior experience. You (the accountant) requested and gathered from various managers the number of orders received each week,

the average weight of each order, and the average cost of each order. You then compared this data to the actual inspection fees incurred. The data is summarized below:

Week Inspection Fees # orders received Size of order (lbs) Cost of order Week 1 $57,600 219,379 889,114 $25,847 Week 2 $36,500 126,965 320,181 $12,748 Week 3 $40,500 197,583 700,000 $43,910 Week 4 $47,200 231,072 539,044 $9,421 Week 5 $54,700 255,388 677,425 $20,382 Week 6 $56,500 142,072 396,396 $16,329 Week 7 $39,500 151,618 468,812 $11,097 Week 8 $30,400 90,306 267,177 $10,190 Week 9 $20,000 72,718 187,030 $6,082 Week 10 $50,000 123,008 466,636 $16,723 Week 11 $30,000 126,341 135,045 $2,932 Week 12 $20,000 41,988 204,808 $4,202 Week 13 $42,900 155,783 576,713 $9,420 Week 14 $55,300 266,358 603,139 $19,635 Week 15 $28,000 46,367 211,147 $9,319 Total $609,100 2,246,946 6,642,667 $218,237 Per Week 40607 149796 442844 $14,549

Explanation / Answer

Hello,

1) Fit the regression equation on the # order recived and size of order,

2) Fit the regression equation on the # order recived and Cost of order

3) Fit the regression equation on the # order recived and Cost of order

from amumg the above 3 regression output the 1)  # order recived and size of order has higest coefficiant of determination.

so most promising regression equation ,

Inspection Fees = 17210.18 + 0.088  # order recived + 0.023 *  size of order ............ regression equation

Q) Which one has the highest coefficient of determination? Construct a cost equation.

regression results for the

1) # orders received

2) Size of order

3) cost of order

we fit the three variable sapratly and calculated coefficiant of determination.

Independent variable with the highest coefficient of determination is: # orders received

Regression Statistics Multiple R 0.84771874 R Square 0.718627062 Adjusted R Square 0.671731572 Standard Error 7400.670927 Observations 15 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 17210.17982 4642.097689 3.707414 0.002995 7095.918 27324.44 7095.918 27324.44 # orders received 0.087803737 0.049044137 1.7903 0.098648 -0.01905 0.194662 -0.01905 0.194662 Size of order (lbs) 0.02313183 0.015825279 1.461701 0.169511 -0.01135 0.057612 -0.01135 0.057612

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