Question

A budget is an expression of management's expectations and goals concerning future revenues and costs. To increase their effectiveness, many budgets are flexible, including allowances for the effect of variation in uncontrolled variables. For example, the costs and revenues of many production plants are greatly affected by the number of units produced by the plant during the budget period, and this may be beyond a plant manager's control. Standard cost-accounting procedures can be used to adjust the direct-cost parts of the budget for the level of production, but it is often more difficult to handle overhead. In many cases, statistical methods are used to estimate the relationship between overhead (y) and the level of production (x) using historical data. As a simple example, consider the historical data for a certain plant. Enter the data into EXCEL and analyze it to answer the following items. Production (in 10,000) units: 5 6 7 8 9 10 11 Overhead costs (in $1000): 12 11.2 13 15 15.8 15.1 17.2 (b) Find the least-squares regression line relating overhead costs to production. (Round your answers to four decimal places.) ŷ = +____ x (c) Graph the regression line on the scatterplot.

          A budget is an expression of management's expectations and goals
concerning future revenues and costs. To increase their
effectiveness, many budgets are flexible, including allowances for
the effect of variation in uncontrolled variables. For example, the
costs and revenues of many production plants are greatly affected
by the number of units produced by the plant during the budget
period, and this may be beyond a plant manager's control. Standard
cost-accounting procedures can be used to adjust the direct-cost
parts of the budget for the level of production, but it is often
more difficult to handle overhead. In many cases, statistical
methods are used to estimate the relationship between overhead
(y) and the level of production (x) using
historical data. As a simple example, consider the historical data
for a certain plant. Enter the data into EXCEL and analyze it to
answer the following items.
Production (in
10,000) units:
5
6
7
8
9
10
11
Overhead costs (in
$1000):
12
11.2
13
15
15.8
15.1
17.2
(b) Find the least-squares regression line relating overhead
costs to production. (Round your answers to four decimal
places.)
ŷ =______ 
+__________  x
(c) Graph the regression line on the scatterplot.

Added by Holly B.

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