Q7 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 squaresmethod to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturingvolume. Consider the following sample of production volumes and total cost data for a manufacturing operation.Production Volume (units)Total Cost ($)400420045047005005100600550070065007507000The data on the production volume x and total cost y for particular manufacturing operation were used to develop the estimated regression equationŷ = 1206.78 + 7.58x.a. The company's production schedule shows that 550 units must be produced next month. Predict the total cost for next month.ŷ*(to 2 decimals)b. Develop a 98% prediction interval for the total cost for next month.(to 2 decimals)t-value(to 3 decimals)Spred(to 2 decimals)Prediction Interval for an individual Value next month) (to whole number)c. If an accounting cost report at the end of next month shows that the actual production cost during the month was $6,000, should managers be concernedabout incurring such a high total cost for the month? Discuss.Basedone month, $6,000 | is notoutside the upper limit of the prediction interval. A sequence of five to seven months withconsistently high costs should cause concern.

Name: Q7 An important application of regression analysis in accounting is in
Uploaded: 2024-03-20T06:47:08.000Z
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Description: Q7 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 squaresmethod to develop an estimated regression equation relating volume and cost, an accountant