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Newton Company Used 'Least Squares Regression Analysis' to Obtain the Following

Question 122

Essay

Newton Company used 'least squares regression analysis' to obtain the following output:
Payroll Department Cost
Explained by Number of Emplo vees
 Constant $5800 Standard error of Y estimate 630r20.8924 Number of observations 20X coefficient(s) $1.902 Standard error of coefficient(s) 0.0966\begin{array}{lr}\text { Constant } & \$ 5800 \\\text { Standard error of Y estimate } & 630 \\\mathrm{r}^{2} & 0.8924 \\\text { Number of observations } & 20 \\& \\X \text { coefficient(s) } & \$ 1.902 \\\text { Standard error of coefficient(s) } & 0.0966\end{array}
Required:
a.What is the total fixed cost?
b.What is the variable cost per employee?
c.Prepare the linear cost function.
d.What is the coefficient of determination? Comment on the goodness of fit.
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Correct Answer:

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a.The constant or intercept is the total...

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