f) Does the regression model provide a good fit to these actual data? How do you
ID: 3364378 • Letter: F
Question
f) Does the regression model provide a good fit to these actual data? How do you know.
g) What is the estimated variable cost per unit produced?
h) Predict the total monthly cost associated with a production level of 500.
i) Construct a 99% Confidence Interval for this prediction.
j) if an accounting cost report at the end of the next month indicates that actual production costs was $6,000, should company managers be concerned that costs are this high? why?
Production TotalCost 400 4000 450 5000 550 5400 600 5900 700 6400 750 7000Explanation / Answer
f) Yes the regression model provide a good fit to these actual data as the R Square : 0.95. Which means 95% of the variablility in the dependent variable is explained by independent variables.
g) Total cost = 1246.67 + 7.6* production
Per unit production will see 7.6 unit growth in total cost keeping all other variable constant.
h) Total cost = 1246.67 + 7.6* 500
= 5046.67
i)
99% cofidence interval
Upper limit = 5046.67+11.23 = 5057.7
lower limit = 5046.67- 3.97 = 5042.7
j) Yes, company managers be concerned that costs are this high as the it beyound the band of regression prediction.
Coefficients t Stat P-value Lower 99.0% Upper 99.0% Intercept 1246.67 2.685856 0.054894 -890.3697055 3383.703039 Production 7.6 9.634759 0.000649 3.968240988 11.23175901Related Questions
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