An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing volume. Consider the following sample of 7 production volumes and total cost data for a manufacturing operation. Production Volume (units) Total Cost ($) a. Use these data to estimate a regression equation that could be used to predict the total cost for a given production volume. Intercept Emmi b. What is the estimated marginal cost per unit produced? (Remember what marginal cost is from Principle of Economics?) ':| c. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation? S d. Suppose the company is producing 500 units per month. What's the additional cost of producing 10 more units? Hint: Notice that I am NOT asking you to calculate the TOTAL cost of producing 510 units. Instead, I am asking you to calculate the ADDITIONAL (i.e. extra) cost of producing those 10 extra units. |:l