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Exam 15: Least-Squares Regression Computations

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Question 1

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In least-squares regression,independent variables are not included in the computations of the slope and intercept.

A) True
B) False

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Question 2

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Gelrud Corporation's recent utility costs are listed below: Management believes that utility cost is a mixed cost that depends on machine-hours. -Using the least-squares regression method,the estimate of the fixed component of utility cost per month is closest to:

A) $19,733
B) $5,809
C) $19,962
D) $5,628

E) A) and B)
F) A) and C)

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Question 3

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Descoteaux Inc.'s inspection costs are listed below: Management believes that inspection cost is a mixed cost that depends on units produced. -Using the least-squares regression method,the estimate of the fixed component of inspection cost per month is closest to:

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?

Carr Company reports the following data for the first six months of the year: -Using the least-squares regression method,the estimated variable electrical cost per machine hour is closest to:

The least-squares regression method:

Least-squares regression selects the values for the intercept and slope of a straight line that minimize the sum of the squared errors.

The management of Ferriman Corporation would like to better understand the behavior of the company's warranty costs.Those costs are listed below for a number of recent months: $\begin{array}{lcc}&\text { Product Returns } & \text { Warranty Cost } \\\text {April }&24 & \$ 2,972 \\\text { May.}&23 & \$ 2,928 \\\text { June.}&27 & \$ 3,141 \\\text {July }&39 & \$ 3,752 \\\text {August }&36 & \$ 3,569 \\\text {September }&35 & \$ 3,551 \\\text { October}&26 & \$ 3,071 \\\text { November.}&37 & \$ 3,636\end{array}$ Management believes that warranty cost is a mixed cost that depends on the number of product returns. Required: Estimate the variable cost per product return and the fixed cost per month using the least-squares regression method.

Executive Training,Inc. ,provides a personal development seminar that is popular with many companies.The number of seminars offered over the last five months,along with the total costs of offering these seminars,follows: $\begin{array}{lcc}&\text { Seminars Offered } & \text { Costs Incurred } \\\text {April }&55 & \$ 15,400 \\\text {May }&45 & \$ 14,000 \\\text {June }&60 & \$ 18,000 \\\text { July}&50 & \$ 14,700 \\\text {August }&75 & \$ 19,000\end{array}$ Required: a.Using the high-low method,estimate the variable cost per seminar and the total fixed cost per month. b.Using the least-squares regression method,compute the variable cost per seminar and the total fixed cost per month.(Round off to the nearest whole dollar. )

Which of the following methods of analyzing mixed costs can be used to estimate an equation for the mixed cost?

The management of Ferry Corporation would like for you to analyze their repair costs,which are listed below: Management believes that repair cost is a mixed cost that depends on the number of machine-hours.Using the least-squares regression method,the estimates of the variable and fixed components of repair cost would be closest to:

Dillenbeck Printing Corp. ,a book printer,has provided the following data: $\begin{array}{lcc}&\text { Titles Printed } & \text { Press Setup Cost } \\\text {February. }&33 & \$ 3,170 \\\text {March. }&34 & \$ 3,203 \\\text { April}&46 & \$ 3,688 \\\text {May. }&28 & \$ 2,996 \\\text {June }&44 & \$ 3,607 \\\text {July }&42 & \$ 3,551 \\\text {August }&43 & \$ 3,586 \\\text {September }&39 & \$ 3,413\end{array}$ Management believes that the press setup cost is a mixed cost that depends on the number of titles printed.(A specific book that is to be printed is called a "title".Typically,thousands of copies will be printed of each title.Specific steps must be taken to setup the presses for printing each title-for example,changing the printing plates.The costs of these steps are the press setup costs. ) Required: Estimate the variable cost per title printed and the fixed cost per month using the least-squares regression method.

When analyzing a mixed cost,you should always plot the data in a scattergraph,but it is particularly important to check the data visually on a scattergraph when the R2 is very high.

Gelrud Corporation's recent utility costs are listed below: Management believes that utility cost is a mixed cost that depends on machine-hours. -Using the least-squares regression method,the estimate of the variable component of utility cost per machine-hour is closest to:

Galarneau Inc.maintains a call center to take orders,answer questions,and handle complaints.The costs of the call center for a number of recent months are listed below: $\begin{array}{lcc}&\text { Calls Taken } & \text { Call Center Cost } \\\text { February.}&7,851 & \$ 85,115 \\\text {March. }&7,820 & \$ 84,934 \\\text {April. }&7,861 & \$ 85,178 \\\text {May. }&7,860 & \$ 85,161 \\\text {June }&7,825 & \$ 84,965 \\\text {July . }&7,836 & \$ 85,009 \\\text {August. }&7,879 & \$ 85,262 \\\text {September }&7,866 & \$ 85,201\end{array}$ Management believes that the cost of the call center is a mixed cost that depends on the number of calls taken. Required: Estimate the variable cost per call and fixed cost per month using the least-squares regression method.

Descoteaux Inc.'s inspection costs are listed below: Management believes that inspection cost is a mixed cost that depends on units produced. -Using the least-squares regression method,the estimate of the variable component of inspection cost per unit produced is closest to:

Recent maintenance costs of Prideaux Corporation are listed below: Management believes that maintenance cost is a mixed cost that depends on machine-hours. -Using the least-squares regression method,the estimate of the variable component of maintenance cost per machine-hour is closest to:

Moeller Inc.'s inspection costs are listed below: Management believes that inspection cost is a mixed cost that depends on the number of units produced.Using the least-squares regression method,the estimates of the variable and fixed components of inspection cost would be closest to:

Below are cost and activity data for a particular cost over the last four periods.Your boss has asked you to analyze this cost so that management will have a better understanding of how this cost changes in response to changes in activity. $\begin{array}{cc}&\text { Activity } & \text { Cost } \\\text { Period 1}&46 & \$ 292 \\\text {Period 2 }&40 & \$ 271 \\\text {Period 3 }&42 & \$ 279 \\\text {Period 4 }&41 & \$ 267\end{array}$ Required: Using the least-squares regression method,estimate the cost formula for this cost.

Carr Company reports the following data for the first six months of the year: -Using the least-squares regression method,the estimated monthly fixed component of the electrical cost is closest to: