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. Production Volume (units) Total Cost ($) 400 4,600 450 5,600 550 6,000 600 6,500 700 7,000 750 7,600 c. Compute the coefficient of determination (to 3 decimals). Do not round intermediate calculations. Note: report r^2 between 0 and 1. What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)? Do not round intermediate calculations. d. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)? Do not round intermediate calculations.
An important application of
| Production Volume (units) | Total Cost ($) |
| 400 | 4,600 |
| 450 | 5,600 |
| 550 | 6,000 |
| 600 | 6,500 |
| 700 | 7,000 |
| 750 | 7,600 |
c. Compute the coefficient of determination (to 3 decimals). Do not round intermediate calculations. Note: report r^2 between 0 and 1.
What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)? Do not round intermediate calculations.
d. 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)? Do not round intermediate calculations.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 4 images
