Your client's company wants to determine the relationship between its monthly operating costs and a potential cost driver. The output of regression analysis showed the following information:
Intercept Coefficient = 89,620
X Variable 1 Coefficient = 62.53
R-square = 0.9852
What is the company's monthly cost equation?
A) y = $62.53x + $89,620
B) y = $98.52x + $89,620
C) y = $89,620x + $62.98
D) y = $89,620x + $98.52

Question

Your client's company wants to determine the relationship between its monthly operating costs and a potential cost driver. The output of regression analysis showed the following information: 
Intercept Coefficient = 89,620
X Variable 1 Coefficient = 62.53
R-square = 0.9852
What is the company's monthly cost equation?
A) y = $62.53x + $89,620
B) y = $98.52x + $89,620
C) y = $89,620x + $62.98
D) y = $89,620x + $98.52

Quizplus · Accepted Answer

The cost equation is in the format y = mx + b, where y is the monthly operating cost, x is the potential cost driver, m is the coefficient for the cost driver, and b is the intercept coefficient. So, the cost equation for this scenario would be y = $62.53x + $89,620.

Your Client's Company Wants to Determine the Relationship Between Its