Method of Least Squares Evaluation of Cost Equation Lassiter

Method of Least Squares, Evaluation of Cost Equation Lassiter Company used the method of least squares to develop a cost equation to predict the cost of moving materials. There were 80 data points for the regression, and the following computer output was generated: Intercept Slope Coefficient of correlation Standard error The activity driver used was the number of moves $17,350 12.00 0.92 $220

Solution

1. Cost Formula = $17350+$12X

2. Cost of moving material if 340 moves are made:

=$17350+ $12*340

= $21430

3. Co efficient of correlation = 0.92

Variability = (0.92) ^2

= 0.8464

Variability percentage = 84.64%