Cost Estimation. 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 production volumes and total cost data for a manufacturing operation.

ProductionVolume (units)	Total Cost($)
400	4000
450	5000
550	5400
600	5900
700	6400
750	7000

1. Use these data to develop an estimated regression equation that could be used to predict the total cost for a given production volume.
2. What is the variable cost per unit produced?
3. Compute the coefficient of determination. What percentage of the variation in total cost can be explained by production volume?
4. The companys production schedule shows 500 units must be produced next month. Predict the total cost for this operation.

calculate with Excel

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