Production Volume (units) Total Cost ($) 400 450 550 600 700 750 3,900 4,900 5,3

Question

Production Volume (units) Total Cost ($) 400 450 550 600 700 750 3,900 4,900 5,300 5,800 6,300 6,900 a. Compute b1 and bo (to 1 decimal) b1 bo Complete the estimated regression equation (to 1 decimal) b. What is the variable cost per unit produced (to 1 decimal)? C. Compute the coefficient of determination (to 3 decimals). Note: report r between 0 and 1 2 What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)? d. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)?

Explanation / Answer

from Excel

a)Slope(b1)=7.6

intercept(b0)=1146.7

b) The Regression model is

y= 1146.7 + 7.6(volume)

c)

Coefficient of determination is 0.96

Hence 96% of variation in the total cost can be explained by the production volume.

d)

When x=500

y= 1146.7 + 7.6(500) =4946.7

SUMMARY OUTPUT Regression Statistics Multiple R 0.979127 R Square 0.95869 Adjusted R Square 0.948362 Standard Error 241.5229 Observations 6 ANOVA df SS MS F Significance F Regression 1 5415000 5415000 92.82857 0.000649 Residual 4 233333.3 58333.33 Total 5 5648333 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 1146.667 464.1599 2.470413 0.068916 -142.048 2435.381 -142.048 2435.381 Volume 7.6 0.788811 9.634759 0.000649 5.409911 9.790089 5.409911 9.790089

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