Refer to Saskatoon Company. When using the least squares (regression) method, what is the yearly utility cost equation (with all variables to the nearest penny)?
A) total utility cost = $8.83 + ($10,630.80 × machine hours)
B) total utility cost = $10,630.80 + ($8.83 × machine hours)
C) total utility cost = $10,630.80 - ($8.83 × machine hours)
D) total utility cost = $127,569.60 + ($8.83 × machine hours)

Question

Quizplus · Accepted Answer

The least squares method provides a cost equation in the form of Y = a + bX, where 'a' is the fixed cost and 'b' is the variable cost per unit. Here, $10,630.80 is the fixed cost and $8.83 is the variable cost per machine hour.