An accountant wishes to predict direct labor cost (y) on the basis of the batch size (x) of a product produced in a job shop. Data for 12 production runs are given in Table 13.5, along with the Excel output from fitting a least squares regression line to the data.

a. By using the formulas illustrated in Example 13.2 and the data provided, verify that (within rounding) b0 = 18.488 and b1 = 10.146, as shown on the Excel output.

b. Interpret the meanings of b0 and b1. Does the interpretation of b0 make practical sense?

c. Write the least squares prediction equation.

d. Use the least squares line to obtain a point estimate of the mean direct labor cost for all batches of size 60 and a point prediction of the direct labor cost for an individual batch of size 60.