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 receiving. There were 80 data points for the regression, and the following computer output was generated:
The activity driver used was the number of receiving orders.
Required:
1. What is the cost formula?
2. Using the cost formula, predict the cost of receiving if 10,000 orders are processed. Now prepare a 95 percent confidence interval for this prediction.
3. What percentage of the variability in receiving cost is explained by the number of receiving orders? Do you think the equation will predict well? Why or why not?
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Related Book For
Cost Management Accounting And Control
ISBN: 9780324233100
5th Edition
Authors: Don R. Hansen, Maryanne M. Mowen
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