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A Firm Has Modeled Its Experience with Industrial Accidents and Found

question 89

Essay

A firm has modeled its experience with industrial accidents and found that the number of accidents per year (Y) is related to the number of employees (X) by the regression equation Y = 3.3 + 0.049*X. R-Square is 0.68. The regression is based on 20 annual observations. The firm intends to employ 480 workers next year. How many accidents do you project?
How much confidence do you have in that forecast?


Definitions:

Fixed Cost

Costs that do not change with the level of output produced, such as rent, salaries, and insurance.

Variable Cost

A cost that changes in proportion to the level of activity or volume of output.

Wages And Salaries

Compensation paid to employees for their labor, with wages typically being hourly rates and salaries being fixed annual amounts.

Activity Variance

The difference between the budgeted amount of activity and the actual amount of activity, which can impact costs and operational efficiency.

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