Question

Data for Oriole Corporation’s maintenance costs is shown below.

		Units Produced				Total Cost
July			18,500				$39,263
August			32,896				49,344
September			37,008				56,540
October			22,616				40,156
November			41,120				76,586
December			39,064				63,736

Compute the variable- and fixed-cost elements using the regression analysis. Present your solution in the form of a cost equation. (We recommend that you use the Intercept and Slope functions in Excel.) (Round intercept to 2 decimal places e.g. 1.25 and slope to 5 decimal places e.g. 1.25125.)

Intercept		$
Slope		$

The cost equation is: $ + $ per unit produced = Total cost

Answer 1

Months	Units Produced(X)	Cost(Y)(in $)	Square of X	X*Y(in $)
July	18,500	39,263	34,22,50,000	72,63,65,500
August	32,896	49,344	1,08,21,46,816	1,62,32,20,224
September	37,008	56,540	1,36,95,92,064	2,09,24,32,320
October	22,616	40,156	51,14,83,456	90,81,68,096
November	41,120	76,586	1,69,08,54,400	3,14,92,16,320
December	39,064	63,736	1,52,59,96,096	2,48,97,83,104
Total	1,91,204	3,25,625	6,52,23,22,832	10,98,91,85,564
	Unit Variable Cost (b) = nΣxy − (Σx)(Σy) /nΣx^2 − (Σx)^2		Total Fixed Cost (a) = Σy − bΣx / n
So here n =6 ,Σx =191,204 Σy =325,625, Σx^2=6,522,322,832 ,Σxy =10,989,185,564
Variable cost per unit(b) =6*10,989,185,564 - (191,204*325,625) / 6*6,522,322,832 - 191,204^2
Variable cost per unit(b) =(65,935,113,384 - 62,360,802,500) / (39,133,936,992 - 36,558,969,616)
Variable cost per unit(b) = $3,674,310,884 / $2,574,967,376 =$1.42693 per unit
Total Fixed cost =325,625 - ($1.42693*191,204) / 6
Total Fixed cost =($325,625 - $272,835) / 6
Total Fixed cost =$52,790 / 6 =$8,798.38
The cost volume formula is:
Y =$8,798.38 + $1.42693X
Slope	8798.38
Intercept	1.42693