An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing volume. Consider the following sample of production volumes and total cost data for a manufacturing operation.

1. Compute b₁ and b₀ (to 1 decimal).
   b₁  
   b₀  
   
   Complete the estimated regression equation (to 1 decimal).
   =  +  x
   
2. What is the variable cost per unit produced (to 1 decimal)?
   $
   
3. Compute the coefficient of determination (to 3 decimals). Note: report r²between 0 and 1.
   r² =  
   
   What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)?
   %
   
4. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)?
   $

a. The cost of a new automobile is $11,200. If the interest rate is 8%, how much would you have to set aside now to provide this sum in eight years? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value            $

b. You have to pay $15,000 a year in school fees at the end of each of the next nine years. If the interest rate is 11%, how much do you need to set aside today to cover these bills? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value            $

c. You have invested $135,000 at 11%. After paying the above school fees, how much would remain at the end of the nine years? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Future value            $

You are buying a car at a cost of $42,000 by taking a loan. The nominal interest rate is 9% per annum compounded monthly. The bank offers 2 options for the structure of the repayments.

• Option 1: The loan will be repaid over 10 years by equal month-end-instalments.

a) Calulate the monthly installment. (1 mark)

b) Calculate the interest component for the 20^th repayment.

c) Calculate the loan outstanding immediately after 8 years (immediately after the payment on that date).

d) Hence or otherwise, calculate the cumulative principal repayments during the 9^th year.

• Option 2: Month-end-instalments of $X will be made for the first 3.5 years. Then the bank offers you a payment free period (i.e., no repayments required) of 1 year. After that, the remaining balance will be repaid over 3.5 years by month-end-instalments of $2X.

e) Calculate X.

a) Explain any FOUR (4) methods in analysing the mixed cost.

State whether or not the following would be an opportunity cost of owning and working in your own business

a. Income earned from working at another occupation

b. income earned from your mutual fund (you still have it)

c. payments for meals

d. payments for property taxes on your person residence (your home)

Assume that the cost of capital (discount rate) for the question that follows is equal to 0.14 (this is a decimal not a percentage).

Consider the following capital budgeting project.

You are considering investing in a business that will cost $200,000 and will create free cash flows at the rate of $30,000 per year for the next 10 years. Your cost of capital was given in the first question. Use that cost of capital in this question.

Within EXCEL compute the following and attach your file to this post.

What is the payback of the project? If you require a payback under 7 years do you accept or reject the project?

What is the discounted payback of the project? If you require a discounted payback under 7 years do you accept or reject the project?

What is the internal rate of return of the project? Do you accept or reject the project given your cost of capital?

What is the MIRR of the project? Do you accept or reject the project given your cost of capital?

What is the NPV of the project? Do you accept or reject the project?

Within the EXCEL spread sheet create a NPV profile of the project using interest rates from 0 to 20% at increments of 1%.

People in the aerospace industry believe the cost of a space project is a function of the mass of the major object being sent into space. Use the following data to develop a regression model to predict the cost of a space project by the mass of the space object. Determine r2 and se.

*(Do not round the intermediate values. Round your answers to 4 decimal places.)
**(Round the intermediate values to 4 decimal places. Round your answer to 3 decimal places.)

ŷ = enter a number rounded to 4 decimal places  * + enter a number rounded to 4 decimal places * x
r² = enter a number rounded to 3 decimal places  **
s_e = enter a number rounded to 3 decimal places  **

An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing volume. Consider the following sample of production volumes and total cost data for a manufacturing operation.

1. Compute b₁ and b₀ (to 1 decimal).
   b₁
   b₀
   
   Complete the estimated regression equation (to 1 decimal).
   ŷ = ____ + _____ x
2. What is the variable cost per unit produced (to 1 decimal)?
   
3. Compute the coefficient of determination (to 3 decimals). Note: report r² between 0 and 1.
   r² =
   
   What percentage of the variation in total cost can be explained by the production volume (to 1 decimal)?
   %
4. The company's production schedule shows 500 units must be produced next month. What is the estimated total cost for this operation (to the nearest whole number)?
   $