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Relationship Between Volume and Cost Productions

VOLUME CHEMICAL (This problem was intended to be solved using the computer.) You are involved in an analysis of the relationship between the cost and the volume of production. You have collected the following inflation-adjusted data.

PRODUCTION UNITS COSTS
700 $61,750
1,450 64,450
1,500 66,000
1,750 69,438
2,100 73,410
2,150 75,720
3,050 79,375

Using the computer:

1. Estimate the cost to produce 2,000 units.

__________________________________

2. Determine the coefficient of determination (r2).

r² =

3. With a 90% confidence level determine whether to use this equation for estimating purposes.

T =

t =

4. What is the prediction interval for your estimate?

At the 90 - confidence level the interval is:

Solution Preview

PRODUCTION UNITS COSTS
700 $61,750
1,450 64,450
1,500 66,000
1,750 69,438
2,100 73,410
2,150 75,720
3,050 79,375

Using the computer:

1. Estimate the cost to produce 2,000 units.

71586.76
The regression equation is Y= 8.4373*X+54712.76

2. Determine the coefficient of determination (r2).

r² = 0.920316

3. With a 90% ...

Solution Summary

The relationship between volume and cost production.

$2.19