Figure 3-7 The following computer printout estimated overhead costs using regression:
Please find the following statistical table
During the last accounting period 10,000 DLH were worked.
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Refer to Figure 3-7.What is the confidence interval for the predicted overhead cost rounded to the nearest whole number for a 90 percent confidence level?
A) predicted value between 100,557 and 100,644
B) predicted value between 100,600 and 175,648
C) predicted value between 75,600 and 125,600
D) none of these

Question

Figure 3-7 The following computer printout estimated overhead costs using regression:
 Please find the following statistical table
 During the last accounting period 10,000 DLH were worked.
-
Refer to Figure 3-7.What is the confidence interval for the predicted overhead cost rounded to the nearest whole number for a 90 percent confidence level?
A) predicted value between 100,557 and 100,644 
B) predicted value between 100,600 and 175,648 
C) predicted value between 75,600 and 125,600 
D) none of these

Quizplus · Accepted Answer

Using the provided statistical table, we can find the standard error of estimate (S sub e) to be 43.5. With a 90% confidence level and 10,000 DLH worked, the t value from the table is 1.645. Therefore, the margin of error is: 
1.645 x 43.5 x sqrt(1 + 1/10,000) = 87.3 
The predicted overhead cost is 100,600. 
Thus, the confidence interval is: 
100,600 - 87.3 = 100,513 to 100,600 + 87.3 = 100,687 
Rounding to the nearest whole number, the confidence interval becomes: 
predicted value between 100,557 and 100,644.

Figure 3-7 the Following Computer Printout Estimated Overhead Costs Using