Question: The method of least squares was used to develop a cost equation to predict the cost of receiving purchased parts at a video game manufacturer.
The method of least squares was used to develop a cost equation to predict the cost of receiving purchased parts at a video game manufacturer. Ninety-six data points from monthly data were used for the regression. The following computer output was received:
| Intercept | 158,700 |
| Slope | 340 |
The cost driver used was number of parts inspected.
Required:
1. What is the cost formula?
Total cost of receiving = $ + ( $ )
2. Using the cost formula from Requirement 1, identify each of the following: independent variable, dependent variable, Variable rate per professional hour, and fixed cost per month.
| Independent variable | ||
| Dependent variable | ||
| Variable rate per professional hour | per part inspected | |
| Fixed cost per month |
3. Using the cost formula, predict the cost of receiving for a month in which 8,000 parts are inspected.
Total cost of receiving = $
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