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Method of Least Squares, Budgeted Time Period Is Different from Time Period Used to Generate Results. The method of least squares was used to develop a cost equation to predict the cost of receiving purchased parts at a video game manufacturer. Ninety-six data points from monthly data were used for the regression.
The following computer output was received:
Intercept 176,500
Slope 435
The cost driver used was number of parts inspected.
Required:
Problem 1. What is the cost formula for a year?
Total annual cost of receiving = ( x $ ) + ( $ × )
Problem 2. Using the cost formula from Requirement 1, predict the cost of parts inspection for a year in which 14,900 parts are inspected.
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