S6-13 Write a cost equation given regression output (Learning Objective 5)

An advertising agency wanted to determine the relationship between its monthly operating costs and a potential cost driver, professional hours. An excerpt from the output of a regression analysis performed using Excel showed the following information:

a. Given this output, write the advertising agency’s monthly cost equation.

b. Should management use this equation to predict monthly operating costs? Explain your answer.

A Multiple R 16 Intercept 17 X Variable 1 1 -23456789012215678 R Square B SUMMARY OUTPUT Regression Statistics 5 Adjusted R Square Standard Error Observations ANOVA 10 Regression Residual Total D 0.87 0.75 0.71 153.46 12 df SS 1 362,391.24 MS 362,391.42 F Significance F 15.39 0.01 10 117,751.61 23,550.32 11 480,142.85 Standard Lower Coefficients Error t Stat P-value 95% Upper 95% 1,784.73 884.55 2.02 9.97 0.22 0.06 3.92 0.01 -489.09 0.07 4,058.55 0.36