P3-52; Regression Analysis
Mr. Liao, CEO of a manufacturer of fine china and stoneware, is troubled by fluctuations in productivity and wants to compute how manufacturing support costs are related to the various sizes of batches of output. The following data show the results of a random sample of 10 batches of one pattern of stoneware:
SAMPLE | BATCH SIZE, X | SUPPORT COSTS, Y
1 15 $180
2 12 140
3 20 230
4 17 190
5 12 160
6 25 300
7 22 270
8 9 110
9 18 240
10 30 320t
- Plot support costs, Y, versus batch size, X
- Using regression analysis, measure the cost function of support costs and batch size.
- Predict the support costs for a batch size of 25
- Using the high-low method, repeat requirements 2 and 3. Should the manager use the high-low or regression method? Explain.
Step by step method for regression analysis is discussed here. Regression coefficients, coefficient of determination, scatter diagram and significance of regression model are explained in the solution.