Question

Method of Least Squares, Budgeted Time Period Is Different from Time Period Used to Generate Results The method of least squares was used to develop a cost equation to predict the cost of receiving purchased parts at a video game manufacturer. Ninety-six data points from monthly data were used for the regression. The following computer output was received: Intercept 147,400 Slope 210 The cost driver used was number of parts inspected. Required: 1. What is the cost formula for a year? Total annual cost of receiving =( x x $ 147,400 ) +($ 210 V ~ Number of parts inspected in a year ) 2. Using the cost formula from Requirement 1, predict the cost of parts inspection for a year in which 13,200 parts are inspected. Total annual cost of receiving = $ Feedback Check My Work 1. Multiply the monthly costs from the cost formulas created by 12 from Ex 3-35. 2. Substitute 13,200 parts for the units (x) in the cost formula.

Answer 1

Solution 1:

Total annual cost of receiving = (12*$147,400) + ($210 * Nos of parts inspected in a year)

Solution 2:

Total annual cost of receiving = (12*$147,400) + (210*$13,200) = $1,768,800 + $2,772,000 = $4,540,800