Your boss would like you to estimate the fixed and variable components of a particular cost. Actual data for this cost over four recent periods appear below. Using the least-squares regression method, what is the cost formula for this cost?
A) Y = $73.71 + $8.98X
B) Y = $0.00 + $15.79X
C) Y = $81.61 + $8.64X
D) Y = $87.04 + $5.88X

Question

Your boss would like you to estimate the fixed and variable components of a particular cost. Actual data for this cost over four recent periods appear below.  Using the least-squares regression method, what is the cost formula for this cost?
A) Y = $73.71 + $8.98X 
B) Y = $0.00 + $15.79X 
C) Y = $81.61 + $8.64X 
D) Y = $87.04 + $5.88X

Quizplus · Accepted Answer

The cost formula can be found through regression analysis using the least-squares method. The fixed cost is represented by the intercept and the variable cost is represented by the slope. Using the data provided and a regression analysis, the cost formula is Y = $81.61 + $8.64X.

Your Boss Would Like You to Estimate the Fixed and Variable