Cost Estimation. 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 ($) 4004000 4505000 5505400 6005900 7006400 7507000 Regression equation y=1246.667 + 7.6xVariable cost per unit produced = 7.6Compute the coefficient of determination. = 0.9587Question 1 - What percentage of the variation in total cost can be explained by production volume?Question 2 - The company’s production schedule shows 500 units must be produced next month. Predict the total cost for this operation.Please do not handwrite...thank you!

Procedure to conduct regression analysis using Excel: Enter the data of Production Volume and Total Cost in an excel sheet. Go to Data > Data Analysis. From Analysis Tool, choose Regression and click OK. In Input Y Range, select the data of Total Cost In Input X Range, select the data of Production Volume. Click OK. Output: From the output, it can be observed that the regression equation obtained is y=1246.6667+7.6x and the coefficient of determination, R2=0.9587.Question 1 - What percentage of the variation in total cost can be explained by production volume? Answer: 95.87% of the variation in total cost can be explained by production volume. Question 2 - The company’s production schedule shows 500 units must be produced next month. Predict the total cost for this operation. Answer: y=1246.6667+7.6xy=1246.6667+7.6500 =5046.6667 The total cost for this operation is predicted as 5046.6667.

Answered: Cost Estimation. An important…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

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Cost Estimation. 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	4000
450	5000
550	5400
600	5900
700	6400
750	7000

Regression equation y=1246.667 + 7.6x

Variable cost per unit produced = 7.6

Compute the coefficient of determination. = 0.9587

Question 1 - What percentage of the variation in total cost can be explained by production volume?
Question 2 - The company’s production schedule shows 500 units must be produced next month. Predict the total cost for this operation.

Please do not handwrite...thank you!

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