EXERCISE 5-12 (30 MINUTES)

1.

Week Units (X) Total Etching Cost (Y)

1 4 18 2 3 17 3 8 25 4 6 20 5 7 24 6 2 16 Statistical software or a spreadsheet application such as Excel can be used to compute the slope and intercept of the least-squares regression line for the above data. The results are: Intercept (fixed cost) ... SFr 12.32 Slope (variable cost per unit) ... SFr 1.54 R

²

... 0.93 Therefore, the cost formula is SFr 12.32 per month plus SFr 1.54 per unit etched or Y = SFr 12.32 + SFr 1.54. Note that the R

²

is 0.93, which means that 93% of the variation in etch-ing costs is explained by the number of units etched. This is a very high R

²

and indicates a good fit.