Delreal Inc.'s inspection costs are listed below: Management believes that inspection cost is a mixed cost that depends on the number of units produced.Using the least-squares regression method,the estimates of the variable and fixed components of inspection cost would be closest to:
A)$20.27 per unit plus $5,905 per month
B)$44.44 per unit plus $10,867 per month
C)$20.68 per unit plus $5,807 per month
D)$20.57 per unit plus $5,837 per month

Question

Quizplus · Accepted Answer

The least-squares regression method calculates the line of best fit by minimizing the sum of the squares of the vertical distances of the points from the line. Based on the given options, choice D provides the closest estimates for the variable and fixed components of inspection cost.