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Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787 Exercise 11
METHOD OF LEAST SQUARES, EVALUATION OF COST EQUATION
A company used the method of least squares to develop a cost equation to predict the cost of purchasing. There were 104 data points for the regression, and the following computer output was generated:
The activity driver used was the number of purchase orders.
Required:
1. What is the cost formula?
2. Using the cost formula, predict the cost of purchasing if 88 orders are processed. Now prepare a 95 percent confidence interval for this prediction. (Round your answers to the nearest dollar.)
3. What percentage of the variability in purchasing cost is explained by the number of purchasing orders? Do you think the equation will predict well? Why or why not?
A company used the method of least squares to develop a cost equation to predict the cost of purchasing. There were 104 data points for the regression, and the following computer output was generated:
The activity driver used was the number of purchase orders.
Required:
1. What is the cost formula?
2. Using the cost formula, predict the cost of purchasing if 88 orders are processed. Now prepare a 95 percent confidence interval for this prediction. (Round your answers to the nearest dollar.)
3. What percentage of the variability in purchasing cost is explained by the number of purchasing orders? Do you think the equation will predict well? Why or why not?
Explanation
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Verified
1. In the method of least square method ...
Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
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