A company used the method of least squares to develop a cost equation to predict the cost
Question:
A company used the method of least squares to develop a cost equation to predict the cost of purchasing. There were 104 data points for the regression, and the following computer output was generated:
The activity driver used was the number of purchase orders.
Required:
1. What is the cost formula?
2. Using the cost formula, predict the cost of purchasing if 88 orders are processed.
Now prepare a 95 percent confidence interval for this prediction. (Round your answers to the nearest dollar.)
3. What percentage of the variability in purchasing cost is explained by the number of purchasing orders? Do you think the equation will predict well? Why or why not?LO1
Step by Step Answer:
Introduction To Cost Accounting
ISBN: 9780538749633
1st International Edition
Authors: Don R. Hansen, Maryanne Mowen, Liming Guan, Mowen/Hansen