Question

Thane Company is interested in establishing the relationship between electricity costs and machine hours. Data have been collected and a regression analysis prepared using Excel. The monthly data and the regression output follow: Month Machine Hours Electricity Costs January 2.500 $ 18.400 February 2,900 21,000 March 1.900 13,500 April 3,100 23,000 May 3.800 28,250 3,300 22,000 4,500 24,750 August 3.500 22,750 September 2,000 15,500 October 3,700 26,000 November 4,700 31.000 December 4.200 27,750 Summary Output Regression Stonistics Multiple 0.965 0.932

Answer 1

Basic form of regression equation as follows

y = a + bx

y = dependent varaible

a = constnt (intercept)

b = coeffiecent of independent varaible

independent variable

In the given question, it is required to estimate the electricity cost in a month with 2200 machine hours

So, electricity cost is dependent variable (variable estimated with given variable), it named as “y”

The Machine hours is independent variable (variable used to estimate another value) it named as “x’’

The intercept of the relationship (a) as given in the question = 3726.88

The coefficient of machine hour (b) as given in the question = 5.77

Required to calculate electricity cost (y), when machine hour (x) is 2200

If the values substitute in the regression equation;

y = 3726.88 +5.77 * 2200

then, y = = 3726.88 + 12694

                                                            

y = 16420.88

If y rounded to nearest whole dollar = $16421

So the electricity cost when the machine hour 2200 would be $16,421

So the option second is the correct answer