Chapter 14_15 Assignment

Exercise 14.21 Algorithmic

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 volumes and total cost data for a manufacturing operatlon. Production Volume (uniIE) Total Cost H) 400 4,600 450 5,600 550 5,009 500 5,500 IUD 7,000 750 7,600 a. Compute 51 and bu (to 1 decimal]. in Complete the estimated regression equation (to 1 decimal}. y= + .3 la. What is the variable cost per unit produced (to 1 decimal)? 1:. Compute the coefcient of determination (to 3 decimals). Note: report 7'2 between I] and 1. a: What percentage of the variation in total cost can be explained by lhe production volume (to 1 decimal)? % d. We company's production schedule shows 500 units must be produced next munl. What is the estimated total cost for this operation (to the nearest whole number)? s