The New Cost Analyst in Your Accounting Department Has Just

question 57

Essay

The new cost analyst in your accounting department has just received a computer-generated report that contains the results of a simple regression program for cost estimation.The summary results of the report appear as follows:
$$\begin{array}{l}\begin{array} { l c c c } \text { Variable } & \text { Coefficient } & \text { Standard Error } & \text { t-Value } \\\text { Constant } & \$ 35.92 & \$ 16.02 & 2.24 \\\text { Independent variable } & \$ 563.80 & \$ 205.40 & 2.74\end{array}\\\mathrm { r } ^ { 2 } = 0.75\end{array}$$
Required:
a.What is the cost estimation equation according to the report?
b.What is the goodness of fit? What does it tell about the estimating equation?
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Definitions:

Total Surplus

The total net gain to society from the creation and utilization of a product or service, expressed as the combined value of consumer surplus and producer surplus.

Positively Sloped

Characterizes a line or curve on a graph that moves upward as one moves from left to right, indicating a direct relationship between two variables.

Negatively Sloped

Describes a downward trend in a graph, indicating an inverse relationship between two variables, such as price and demand.

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total benefit to society from the production and consumption of goods or services.