о 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. о о O Production Volume (units) Total Cost ($) 400 4,000 450 5,000 550 5,400 600 5,900 700 750 6,400 7,000 a. Use these data to develop an estimated regression equation that could be used to predict the total cost for a given production volume. Do not round intermediate calculations. Compute b₁ and bo (to 1 decimal). bi bo Complete the estimated regression equation (to 1 decimal). Do not round intermediate calculations ŷ=1338.6 + 7.44 I b. What is the variable cost per unit produced (to 2 decimal)? Do not round intermediate calculations $ 7.44 c. Compute the coefficient of determination (to 3 decimals). Do not round intermediate calculations. Note: report r² between 0 and 1. 72 == 0.949 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. Predict the total cost for this operation (to the nearest whole number). Do not round intermediate calculations
о 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. о о O Production Volume (units) Total Cost ($) 400 4,000 450 5,000 550 5,400 600 5,900 700 750 6,400 7,000 a. Use these data to develop an estimated regression equation that could be used to predict the total cost for a given production volume. Do not round intermediate calculations. Compute b₁ and bo (to 1 decimal). bi bo Complete the estimated regression equation (to 1 decimal). Do not round intermediate calculations ŷ=1338.6 + 7.44 I b. What is the variable cost per unit produced (to 2 decimal)? Do not round intermediate calculations $ 7.44 c. Compute the coefficient of determination (to 3 decimals). Do not round intermediate calculations. Note: report r² between 0 and 1. 72 == 0.949 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. Predict the total cost for this operation (to the nearest whole number). Do not round intermediate calculations
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 40E: Matching Cost Behavior Descriptions to Cost Behavior Graphs Select the graph (A through L) that best...
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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.
о
о
O
Production Volume (units)
Total Cost ($)
400
4,000
450
5,000
550
5,400
600
5,900
700
750
6,400
7,000
a. Use these data to develop an estimated regression equation that could be used to predict the total cost for a given production volume. Do not round intermediate calculations.
Compute b₁ and bo (to 1 decimal). bi
bo
Complete the estimated regression equation (to 1 decimal). Do not round intermediate calculations
ŷ=1338.6
+ 7.44
I
b. What is the variable cost per unit produced (to 2 decimal)? Do not round intermediate calculations
$
7.44
c. Compute the coefficient of determination (to 3 decimals). Do not round intermediate calculations. Note: report r² between 0 and 1.
72
== 0.949
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. Predict the total cost for this operation (to the nearest whole number). Do not round intermediate
calculations
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