Question

Furlan Printing Corp., a book printer, has provided the following data:

	Titles Printed		Press Setup Cost
May	36		$	3,365
June	37		$	3,398
July	49		$	3,883
August	31		$	3,191
September	47		$	3,802
October	45		$	3,746
November	46		$	3,748
December	42		$	3,560

Management believes that the press setup cost is a mixed cost that depends on the number of titles printed. (A specific book that is to be printed is called a "title". Typically, thousands of copies will be printed of each title. Specific steps must be taken to setup the presses for printing each title-for example, changing the printing plates. The costs of these steps are the press setup costs.)

Required:

Estimate the variable cost per title printed and the fixed cost per month using the least-squares regression method. (Round the "Variable cost" to 2 decimal places and the "Fixed cost" to the nearest dollar amount.)

Answer 1

May June 77 Answer Page: No 0 The least squares method follows the coof sfonction Я = a+bx where; ga. Total cost a. Total fixed cost · bu yariable coof pey level of activily a = level of activity and n=8. Month Titleapainted (3) Press setup cook (9) ry $ 3365, $121140 1396 $ 3398 $125726 1369 July $ 3883 $190267 8401 $ 3191 $ 98921 961 In September $ 3802 $178694 2209 October $3446 $168570 2025 November $3748 $142408 2116 December 42 $ 3560 1764 Total EX = 333 Ey - 28693 Exy=$1265246 Ex?=14141 :::be nexy - (2x) * (y) . Ex² - (£x)2 (8 x 12.05346) - ( 333 X a 8693) (8x14141) – (383) 49 August 45: 46 $ 149520

Page No ® 9641968 - 9554769 113128 - 110889 87199 2239 38.95 = $38.95 per title pointed 15 Ey - bx Ex 28693 -- (38.95 X 333) 28693 – 12970.35 = 15722.65 $1965,33 ñ $ 1965 iia = $1965 per month The coat fonction for the particular set esing least squares method is y = 4 1965 + $38.95% I variable cost fixed cost $38.95 (por title printed 1 & 1965 Iper month