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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)?

Attachments

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.

$2.19