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

Question

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

Quizplus · Accepted Answer

The solution using Microsoft Excel functions is:
slope = $1.70 per activity
intercept = $15.80 per period
The solution using the formulas in the text is:
n = 4
sumX = 102
sumY = $237
sumXY = $6,127
sumX2 = 2,650
b = [n(sumXY) - (sumX)(sumY))]/[n(sumX^2) - (sumX)^2]
= [4($6,127) - (102)( $237))]/[4(2,650) - (102)^2]
= $1.70
a = [(sumY) - b(sumX)]/n
= [($237) - $1.70(102)]/4
= $15.80
Any difference in the solutions is due to rounding errors when the formulas are use

Your Boss Would Like You to Estimate the Fixed and Variable