Question

In: Accounting

Part 2: Cameron Company is interested in establishing the relationship between utility costs and machine hours....

Part 2: Cameron Company is interested in establishing the relationship between utility costs and machine hours. Data has been collected and a regression analysis prepared using Excel. The monthly data and the regression output follow:

Month MACHINE HOURS ELECTRICITY COSTS
JAN 3250 22080
FEB 3770 25200
MAR 2470 16200
APR 4030 27600
MAY 4940 33900
JUN 4290 26400
JUL 5330 29700
AUG 4550 27300
SEP 2600 18600
OCT 4810 31200
NOV 6110 37200
DEC 5460 33300



Required:
a. Using Excel, perform a regression analysis on the above data and generate a summary output.  

b. What is the equation for utility costs using the regression analysis?

c. Prepare an estimate of utility costs for a month when 3,000 machine hours are worked.


Solutions

Expert Solution

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SUMMARY OUTPUT
Regression Statistics
Multiple R                                                                                    0.96538
R Square                                                                                    0.93197
Adjusted R Square                                                                                    0.92516
Standard Error                                                                             1,710.21088
Observations                                                                                        12.00
ANOVA
df SS MS F Significance F
Regression                                                                                           1.00 400,652,987.60 400,652,987.60 136.983752100    0.000000369
Residual                                                                                        10.00     29,248,212.40       2,924,821.24
Total                                                                                        11.00 429,901,200.00
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept                                                                        4,472.2547160 2,019.3896880           2.2146566           0.0511556     -27.2258867 8,971.7353190 -27.2258867 8,971.7353190
Machine Hours (x)                                                                                5.3286755           0.4552865         11.7040058           0.0000004        4.3142340         6.3431170      4.3142340         6.3431170
(b) The regression equation is y = 4472.25 + 5.3287x
(c)   When x = 3000, y = 4472.25 + 5.3287(3000) = 20458.35

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