Question

George Caloz & Frères, located in Grenchen, Switzerland, makes prestige high-end custom watches in small lots. One of the company’s products, a platinum diving watch, goes through an etching process. The company has observed etching costs as follows over the last six weeks:

Week	Units			Total Etching Cost
1		14			$	27
2		11			$	20
3		16			$	30
4		10			$	20
5		12			$	25
6		15			$	28
		78			$	150

For planning purposes, management would like to know the amount of variable etching cost per unit and the total fixed etching cost per week.

Required:

1.	Prepare a scattergraph plot. (Place etching costs on the vertical axis and units on the horizontal axis.)

  

Instructions:
1.	On the graph below, use the point tool (Week 1) to plot units on the horizontal axis and total etching cost on the vertical axis.
2.	Repeat the same process for the plotter tools (Week 2 to Week 6).
3.	To enter exact coordinates, click on the point and enter the values of x and y.
4.	To remove a point from the graph, click on the point and select delete option.

      

2(a).

Using the least-squares regression method, estimate the variable and fixed elements of etching cost. (Round your answers to 2 decimal places.)

     

  

2(b).

Express the cost data in (2a) above in the form Y = a + bX. (Round your answers to 2 decimal places.)

     

         

3.	If the company processes thirteen units next week, what would be the expected total etching cost? (Round your intermediate and final answers to 2 decimal places.)

     

Answer 1

2(a).
Week	Units (X)	Total Etching Cost  Y)
1	14	$       27.00
2	11	$       20.00
3	16	$       30.00
4	10	$       20.00
5	12	$       25.00
6	15	$       28.00
	78	$     150.00
SUMMARY OUTPUT
Regression Statistics
Multiple R	0.966987557
R Square	0.935064935
Adjusted R Square	0.918831169
Standard Error	1.195228609
Observations	6
ANOVA
	df	SS	MS	F	Significance F
Regression	1	82.2857143	82.2857143	57.6	0.00161674
Residual	4	5.71428571	1.42857143
Total	5	88
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept = Fixed cost	2.714285714	2.97666663	0.91185412	0.41342975	-5.5502658	10.9788372	-5.5502658	10.9788372
X Variable 1 = Units	1.714285714	0.22587698	7.58946638	0.00161674	1.08715069	2.34142074	1.08715069	2.34142074
b)
Y = a + bX.
Y = 2.71 + 1.71 X
c)
Expected total etching cost = $2.71 + $1.71 x 13 units	$                  25.00

2)