An important application of regression analysis in accounting is in the estimation of cost.By collecting data on volume and cost and using the least squares method to develop anestimated regression equation relating volume and cost, an accountant can estimate the costassociated with a particular manufacturing volume. Consider the following sample of productionvolumes and total cost data for a manufacturing operation.Production Volume (units) Total Cost ($)400 4000450 5000550 5400600 5900700 6400750 7000a. Use these data to develop an estimated regression equation that could be used topredict the total cost for a given production volume.b. What is the variable cost per unit produced?c. Compute the coefficient of determination. What percentage of the variation in totalcost can be explained by production volume?d. The company’s production schedule shows 500 units must be produced next month.What is the estimated total cost for this operation?
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