Below Are Cost and Activity Data for a Particular Cost

question 6

Essay

Below are cost and activity data for a particular cost over the last four periods. Your boss has asked you to analyze this cost so that management will have a better understanding of how this cost changes in response to changes in activity.
Required:
Using the least-squares regression method, estimate the cost formula for this cost.
n = 4
sumX = 180
sumY = 1,382
sumXY = 62,247
sumX^2 = 8,110
b = [n(sumXY)-(sumX)(sumY)]/[n(sumX^2)-(sumX)^2]
= [4(62,247)-(180)(1,382)]/[4(8,110)-(180)^2]
= $5.70 (rounded to nearest whole cent)

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Definitions:

Investment

The allocation of resources, usually money, in expectation of achieving a future return or profit.

Annual Dividend

The total amount of dividends a company pays out to its shareholders each year, usually quoted as an amount per share.

Constant Rate

A stable growth or decline rate over a period, often used in the calculation of interest and financial forecasting.

Discount Rate

This is the interest rate used in discounted cash flow (DCF) analysis to present values of future cash flows back to their value today.