Chapter 2A, Problem 2A.5E

Least-Squares Regression LO2-11

George Caloz ** Frères, located in Grenchen, Switzerland, makes luxury custom watches in small lots. One of the company’s products, a platinum diving watch, goes through an etching process. The company has recorded etching costs as follows over the last six weeks:

For planning purposes, management would like to know the variable etching cost per unit and the total fixed etching cost per week.

Required:

1. Prepare a scattegraph plot. (Plot etching costs on the vertical axis and units on the horizontal axis.)
2. Using the least-squares regression method, estimate the variable etching cost per unit and the total fixed etching cost per week Express these estimates in the form $Y=a+bX$.
3. If the company processes five units next week, what would be the expected total etching cost? (Round your answer to the nearest cent.)