Question

Grawburg Inc. maintains a call center to take orders, answer questions, and handle complaints. The costs of the call center for a number of recent months are listed below:

	Calls Taken	Call Center Cost
April	7560	$	81,960
May	7529	$	81,773
June	7570	$	82,025
July	7568	$	81,997
August	7535	$	81,816
September	7549	$	81,895
October	7592	$	82,156
November	7579	$	82,092

Management believes that the cost of the call center is a mixed cost that depends on the number of calls taken.

The excel least squares regression output is as follows:

$xid-11082791_1$

Using the output above identify the following:

What is the “measure of goodness of fit”? (round to 2 decimal place)
What is the variable cost per unit based on the regression equation? (round to 2 decimal place)	$
What is the fixed cost portion of Inspection Costs? (round to 2 decimal place)	$
Cost equation for Inspection Costs (in the linear equation format)	Y=
Estimated Inspection costs when 973 units are produced (round to nearest whole dollar)	$

Answer 1

SOLUTION:-

Given the excel least squares regression output is as follows:-

By using regression tool in excel,we can get regression stats

1 SUMMARY OUTPUT 3 Regression Statistics 4 Multiple R 0.998197941 5 R Square 0.996399129 Adjusted R Square 0.995798984 7 Standard Error 8.529319789 8 Observations 9 10 ANOVA Significance F 1.46103E-08 12 Regression 13 Residual 14 Total 1 6 SS MS F 120783.0042 120783.0042 1660.263546 436.4957764 72.74929606 121219.5 7 15 16 17 Intercept 18 X Variable 1 Coefficients Standard Error Stat P-value 35914.18784 1130.168636 31.77772476 6.45376E-08 6.09107664 0.14948773 40.74633168 1.46103E-08 Lower 95% Upper 95% Lower 95.0% Upper 95.0% 33148.76481 38679.61086 33148.76481 38679.61086 5.725293341 6.456859938 5.725293341 6.456859938

1) Measure of goodness of fit = R

Square =0.996 or 1

2) Variable cost per unit = X Variable

1 = $6.09 per unit (coefficients)

3) Fixed cost portion = Intercept

= $3591.19

4) Cost equation = 6.09 * X + $35914.19

5) Estimated Inspection costs = 6.09 * X + $35914.19

= 6.09 * 973 + $35914.19

6) Estimated Inspection costs = $41839.76.

Hence proved all the Estimated inspections costs.....

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