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