Method of Least Squares, Developing and Using the Cost Formula 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 201,200
Slope 365
The cost driver used was number of parts inspected.
1. What is the cost formula?
Total cost receiving of =$ + ($x)
2. Using the cost formula from Requirement 1, identify each of the following: independent variable, dependent variable, Variable rate per professional hour, and fixed cost per month.
3. Using the cost formula, predict the cost of receiving for a month in which 8,000 parts are inspected.
Total cost of receiving = $