# Production costs for textbooks, a linear regression equation

See attached file for clarity.

Data Item Quantity (# of Books Produced) Total Cost of Production

1 2 $30

2 5 $40

3 8 $73

4 10 $100

5 11 $130

6 12 $90

7 14 $150

8 15 $160

9 16 $160

10 17 $180

11 18 $240

12 19 $280

13 20 $180

14 21 $181

15 22 $185

16 23 $190

17 24 $200

18 25 $200

19 26 $275

20 28 $215

21 30 $220

22 31 $221

23 32 $225

24 33 $200

25 34 $205

26 35 $206

27 36 $210

28 37 $200

29 38 $388

30 40 $275

31 41 $400

32 42 $428

33 43 $413

34 44 $450

35 45 $460

36 46 $450

37 47 $471

38 48 $500

39 49 $476

40 50 $450

Use these sums to verify your data entry into Excel 1,137 $10,104

If there any necessary assumptions please state and include.

1. Please describe, with words and numerical coefficients, your model for the total cost function (again assuming a linear model).

2. How much variance in total cost is explained by estimating it with number of units manufactured using this linear model?

3. What is your best point-estimate (single number) for fixed cost? What about variable cost of producing 20 textbooks (again, single number)?

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#### Solution Preview

Please see the attached files.

To answer the question we have to find a linear regression equation assuming the total cost is linearly related to the number of books produced.

This can be done by using MS excel as follows:

Copy the data in a excel sheet.

Draw the scatter diagram by taking X values as the number of books produced and Y values as the cost of production.

Then ...

#### Solution Summary

Production costs for textbooks and a linear regression equation is examined.