Question

Can you please assist with this problem?

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 voures and total cost data for a manufacturing operation Production Volume (units) Total Cost ($) 400 4,000 450 5,100 5,300 600 5,000 700 750 7,000 () Use these data to develop an estimated regression equation that could be used to predict the total cost for a given production volume (Round your numerical values to two decimal places.) (b) What is the variable cost in dollars) per un produced (c) Compute the coefficient of determination (Round your answer to three decimal places.) what percentage of the variation in total cost can be explained by production volume? (found your answer to one decimal place) (d) The company production schedule shows 650 unts must be produced next month, Predict the total cost in dotars) for this operation (Round your answer to the nearest cent.) $

Answer 1

Solution

we will solve it by using excel and the steps are

Enter the Data into excel

Click on Data tab

Click on Data Analysis

Select Regression

Select input Y Range as Range of dependent variable.

Select Input X Range as Range of independent variable

click on labels if your selecting data with labels

click on ok.

So this is the output of Regression in Excel.

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.9740
R Square	0.9486
Adjusted R Square	0.9358
Standard Error	270.8013
Observations	6.0000
ANOVA
	df	SS	MS	F	Significance F
Regression	1.0000	5415000.0000	5415000.0000	73.8409	0.0010
Residual	4.0000	293333.3333	73333.3333
Total	5.0000	5708333.3333
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	1246.6667	520.4272	2.3955	0.0747	-198.2708	2691.6041	-198.2708	2691.6041
Production Volume	7.6000	0.8844	8.5931	0.0010	5.1444	10.0556	5.1444	10.0556

1. Total cost = 1246.67+7.60*Production Volume

2.$7.6

3. Cofficient of determination : 0.9486

The 94.86% variation in total cost explained by Production Volume.

4.

If Production Volume = 650 then total cost will be..

Total cost = 1246.67+7.60*650

Total cost = 6187