Yates Corp. wants to develop a cost equation for its administrative costs. The controller believes the appropriate cost driver is units produced. Last year's data are presented below:MonthUnits ProducedAdministrative CostsJanuary 32,500 $24,288 February 37,700 27,720 March 24,700 17,820 April 40,300 30,360 May 49,400 37,290 June 42,900 29,040 July 53,300 32,670 August 45,500 30,030 September 26,000 20,460 October 48,100 34,320 November 61,100 40,920 December 54,600 36,630 SUMMARY OUTPUTRegression StatisticsMultiple R0.965383R Square0.931965Adjusted R-Square0.925162Standard Error1,881.232Observations12 CoefficientsStandard Errort StatP-valueLower 95%Upper
95%Intercept4,919.482,221.3292.210.051156-29.94859,868.909Units produced0.5861540.05008211.703.69E-070.4745660.697743Required:(a.) What is the equation for administrative costs using the regression analysis?(b.) Does the variable "units produced" have statistical significance? Explain.(c.) Prepare an estimate of administrative costs for a month when 30,000 units are produced.
What will be an ideal response?
(a.)
Total Administrative Costs = $4,919.48 + ($0.586154 × units)
(b.)
Yes, the t-stat of 11.70 exceeds the general rule of thumb of 2.
(c.)
$4,919.48 + ($0.586154 × 30,000) = $22,504.10
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