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?

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?

Quizplus · Accepted Answer

Using the least-squares regression method, the cost formula is:
Y = a + bX
where Y = total cost, X = number of units produced.
Using the data provided and running a regression analysis, the equation obtained is:
Y = $75.50 + $2.02X
Therefore, the best choice is D. Using Microsoft Excel, the slope and intercept are: 11ea7998_5e32_35e0_911b_69a6bcc211ba_TB2627_00_TB2627_00 Therefore, the cost formula is $75.50 per activity plus $2.02 per unit or:
Y = $75.50 + $2.02X

Your Boss Would Like You to Estimate the Fixed and Variable