Lassiter Company used the method of least squares to develop a cost equation to predict the cost of moving materials. There were 80 data points for the regression, and the following computer output was generated:
Intercept .........$17,350
Slope ............ 12.00
Coefficient of correlation .... 0.92
Standard error ........ $220
The activity driver used was the number of moves.
Required:
1. What is the cost formula?
2. Using the cost formula, predict the cost of moving materials if 340 moves are made. Now prepare a 95 percent confidence interval for this prediction.
3. What percentage of the variability in moving cost is explained by the number of moves? Do you think the equation will predict well? Why or why not?