Examine the following data from the preliminary analytical procedures for HammerHead Company, a Canadian tool manufacturer, that relates manufacturing costs of a socket wrench to units manufactured.

Required

a. Estimate a univariate regression where units of production predict production costs. An electronic spreadsheet can calculate the model parameters and will report many of the following values.

b. Calculate the coefficient of correlation. How well does units manufactured predict manufacturing costs?

c. Calculate a prediction for January 2007 's production costs if production was 75,000 wrenches. If the actual production costs were \(\$ 375,000\), would you attribute it to error or to randomness in the process?

d. Interpret the "slope" and "intercept" term of the regression. Do they represent "variable" and "fixed" costs, respectively? Why or why not?

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Production Costs (in Units Manufactured (in thousands) Month January 2006 February March April May thousands of dollars) $114 20 921 196 560 115 245 50 575 122 June 475 100 July 138 33 August 727 154 September 375 80 October 670 147 November 828 182 December 762 160