Deck 2: Least-Squares Regression Computations

Question 1

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 = $0.00 + $7.55X
B)Y = $110.44 + $2.70X
C)Y = $103.38 + $3.00X
D)Y = $113.35 + $0.89X

Answer 1

B

Question 2

_________________ is a method of separating a mixed cost into its fixed and variable elements by fitting a line to the data that minimizes the sum of the squared errors.

A)Account analysis
B)Scattergraph
C)High-low
D)Least-square regression

Answer 2

D

Question 3

Using the least-squares regression method, the estimate of the variable component of inspection cost per unit produced is closest to:

A)$5.40
B)$5.33
C)$5.43
D)$16.07

Answer 3

C

Question 4

Using the least-squares regression method, the estimate of the fixed component of maintenance cost per month is closest to:

A)$6,066
B)$7,244
C)$5,944
D)$7,130

Question 5

Using the least-squares regression method, the estimated variable cost per labor hour for maintenance is closest to:

A)$1.88
B)$1.52
C)$1.09
D)$1.96

Question 6

Using the high-low method of analysis, the estimated variable cost per labor hour for maintenance is closest to:

A)$0.83
B)$1.84
C)$1.30
D)$1.14

Question 7

Using the least-squares regression equation, the total maintenance cost for March is:

A)above the regression line.
B)on the regression line.
C)below the regression line.
D)outside the relevant range.

Question 8

The R² (i.e., R-squared) is a measure of the goodness-of-fit in least-squares regression.

Question 9

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.

Question 10

The management of Buff Sports Stadium believes that the number of sporting events each month is an measure of activity for total clean-up cost. Shown below are event figures and total clean up costs for the past four months: Required:
a. Estimate Buff's cost formula for monthly clean-up cost using the high-low method.
b. Estimate Buff's cost formula for monthly clean-up cost using the least-squares regression method.

Question 11

Using the least-squares regression method, the estimate of the variable component of maintenance cost per machine-hour is closest to:

A)$1.85
B)$10.30
C)$1.67
D)$1.90

Question 12

CPE for CPAs, Inc., provides continuing professional education for certified public accountants. The company is relatively new and management is seeking information regarding the company's cost structure. The following information has been gathered for the first six months of the current year: 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, estimate the variable cost per seminar and the total fixed cost per month.

Question 13

Laborn 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)$43.04 per unit plus $10,648 per month
B)$34.63 per unit plus $2,089 per month
C)$34.78 per unit plus $2,044 per month
D)$36.00 per unit plus $1,714 per month

Question 14

Escalona 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.

Question 15

The management of Bandle 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)$6.72 per machine-hour plus $55,230 per month
B)$6.80 per machine-hour plus $54,679 per month
C)$7.28 per machine-hour plus $51,389 per month
D)$14.66 per machine-hour plus $101,993 per month

Question 16

Sablan 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 17

Using the least-squares regression method, the estimated total fixed cost per month for maintenance is closest to:

A)$470
B)$416
C)$400
D)$378

Question 18

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 from a least squares regression is low. A quick look at the scattergraph can reveal that there is little relation between the cost and the activity or that the relation is something other than a simple straight line.

Question 19

Using the least-squares regression method, the estimate of the fixed component of inspection cost per month is closest to:

A)$6,983
B)$10,342
C)$10,527
D)$6,972

Question 20

Using the high-low method of analysis, the estimated total fixed cost per month for maintenance is closest to:

A)$440
B)$407
C)$470
D)$0

Question 21

The management of Sambrano 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.