The method of least squares was used to develop a cost equation to predict the cost of
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. 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.
Step by Step Answer:
Managerial Accounting The Cornerstone of Business Decision Making
ISBN: 978-1337115773
7th edition
Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger