Question

Your boss would like you to estimate the fixed and variable components of a particular cost. Actual data for this cost over four recent periods appear below. Activity 34 33 Period 1 Period 2 Period 3 Period 4 Cost $388 $377 $362 $406 30 Using the least-squares regression method, what is the cost formula for this cost? Multiple Choice O Y = $106.64 + $8.48X O Y = $0.00 + $15.29X

Answer 1

Month	Activity(X)	Cost(Y)(in $)	Square of X	X*Y(in $)
Period 1	34	388	1,156	13,192
Period 2	33	377	1,089	12,441
Period 3	30	362	900	10,860
Period 4	35	406	1,225	14,210
Total	132	1,533	4,370	50,703
	Unit Variable Cost (b) = nΣxy − (Σx)(Σy) /nΣx^2 − (Σx)^2		Total Fixed Cost (a) = Σy − bΣx / n
So here n =4 ,Σx =132 Σy =1,533, Σx^2=4,370 ,Σxy =50,703
Variable cost per unit(b) =4*50,703 - (132*1,533) / 4*4,370 - 132^2
Variable cost per unit(b) =202,812 - 202,356 / 17,480 - 17,424
Variable cost per unit(b) = 456 / 56 =$8.14
Total Fixed cost =1,533 - ($8.14*132) / 4
Total Fixed cost =(1,533 - 1,074) / 4
Total Fixed cost =$459 / 4 =$114.75
The cost volume formula is:
y =$114.75 + $8.14X