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..................147,400

Slope...........................210

The cost driver used was number of parts inspected.

Required:

1. What is the cost formula?

2. using the cost formula from Requirement 1, identify each of the following: independent variable, dependent variable, variable rate, and fixed cost per month.

3. using the cost formula, predict the cost of receiving for a month in which 6,800 parts are inspected.

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