Question

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

	Titles Printed		Press Setup Cost
May	36		$	3,178
June	37		$	3,211
July	49		$	3,696
August	31		$	3,004
September	47		$	3,615
October	45		$	3,559
November	46		$	3,561
December	42		$	3,680

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

Fixed cost = intercept = $1800

Variable cost = slope = X variable 1 = $39.36

thus,

cost equation: Y = $1800+$39.36X

Using Excel, the following results are derived for the least-squares regression

SUMMARY OUTPUT Titles printed Press setup cost 3178 3211 3696 3004 3615 3559 46 3561 42 3680 Regression Statistics Multiple R 0.937056 R Square 0.878074 Adjusted R Square 0.857753 Standard Error 100.1634 Observations ANOVA df Regression Residual Total SS MS F gnificance 1 433515.8 433515.8 43.21025 0.000594 6 60196.23 10032.71 7 493712 Intercept X Variable 1 Coefficientandard Errt Stat P-value Lower 95%Upper 95%ower 95.0%pper 95.0% 1799.771 251.7225 7.149821 0.000377 1183.828 2415.714 1183.828 2415.714 39.35686 5.987244 6.573451 0.000594 24.7066 54.00711 24.7066 54.00711