Cost functions are often nonlinear with volume because production facilities are often able to produce larger quantities at lower rates than smaller quantities. 5 Using the following data, apply simple linear regression, and examine the residual plot. What do you conclude? Construct a scatter chart and use the Excel Trendline feature to identify the best type of curvilinear trendline that maximizes R2.

Costs $12,500 $25,000 $32,500 $40,000 $45,000 $50,000 Units Produced 500 1,000 1,500 2,000 2,500 3,000