Problem $6-42$

Continuation of Preceding

Problem; Computing Least$-$

Squares Regression Esti$-$

mates; Comparing Multiple

Methods $($Appendix$)$

$($L$06-1,6-2,6-5,6-6,6-9)$

$2.$ Total monthly cost: $$9,943$

$+$$$\mathrm{.}89$ per unit of activity

Refer to the original data in the preceding problem for Martha's Vineyard Marine Supply.

Required:

Build a spreadsheet: Construct an Excel spreadsheet and use the Excel commands to perform a least$-$squares regression. Estimate the variable$-$ and fixed$-$cost components in the company's material$-$handling department costs.

Write the least$-$squares regression equation for the department's costs.

Chapter $6$ Activity Analysis, Cost Behavior, and Cost Estimation

'Predict the firm's material$-$handling department's costs for a month when $2,300$ units of activity are recorded.

Why do the three cost predictions computed in this and the preceding problem differ? Which method do you recommend? Why?

Build a spreadsheet: Use your Excel spreadsheet from requirement $1$ to compute the $R^2$ value for the regression. Interpret the $R^2$ value.