Deck 24: Least-Squares Regression Computations

Question 1

Recent maintenance costs of Pavelko 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 fixed component of maintenance cost per month is closest to:

A) $7,826
B) $6,036
C) $7,950
D) $6,199

Answer 1

D

Question 2

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?

A) Y = $24.51 + $1.08X
B) Y = $10.33 + $1.92X
C) Y = $0.00 + $2.32X
D) Y = $15.80 + $1.70X

Answer 2

D

Question 3

Recent maintenance costs of Pavelko 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:

A) $3.26
B) $13.45
C) $2.00
D) $2.96

Answer 3

D

Question 4

Delreal 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:

A) $20.27 per unit plus $5,905 per month
B) $44.44 per unit plus $10,867 per month
C) $20.68 per unit plus $5,807 per month
D) $20.57 per unit plus $5,837 per month

Question 5

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.
Required:
Using the least-squares regression method, estimate the cost formula for this cost.
n = 4
sumX = 180
sumY = 1,382
sumXY = 62,247
sumX^2 = 8,110
b = [n(sumXY)-(sumX)(sumY)]/[n(sumX^2)-(sumX)^2]
= [4(62,247)-(180)(1,382)]/[4(8,110)-(180)^2]
= $5.70 (rounded to nearest whole cent)

Question 6

The R2 (i.e., R-squared) indicates the proportion of a mixed cost that is variable.

Question 7

Meleski 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:

A) $4.40
B) $4.79
C) $3.47
D) $3.37

Question 8

Magnano 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:

A) $4,400
B) $1,290
C) $4,585
D) $1,318

Question 9

The management of Archie 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:
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.

Question 10

Magnano 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:

A) $3.51
B) $3.49
C) $4.93
D) $3.54

Question 11

The management of Smoots 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:

A) $4.64 per machine-hour plus $34,603 per month
B) $2.09 per machine-hour plus $19,018 per month
C) $2.79 per machine-hour plus $13,787 per month
D) $2.00 per machine-hour plus $19,649 per month

Question 12

Mccatty 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:
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.

Question 13

Meleski 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) $4,649
B) $5,028
C) $16,975
D) $16,850

Question 14

Stamp Printing Corp., a book printer, has provided the following data:
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.