You are involved in an analysis of the relationship between the cost of chemicals
used in a manufacturing process and the volume of production. You have
collected the following production usage data over the last five years and
adjusted it for the effects of inflation:
Table 3.8—Production Usage Data
Production Units Chemical Costs
4 $800
15 $1,200
20 $1,400
30 $1,800
50 $2,000
1. Estimate the cost to produce 26 units. (Hint: Use the regression template.)
2. Determine the coefficient of determination (r2).
3. Determine whether to use this analysis for estimating purposes.
* The cost is dependent on the
units produced. When using
the regression spreadsheet, be
sure to put the numbers in the
right columns for dependent
and independent variables!
In other words, is the r-squared
value above 80%, indicating a
reliable relationship between the
variables?
EXERCISE #2: JOHNSON IMAGING, INC.
You have obtained the following Johnson Imaging data related to MRI
production:
Table 3.9—Johnson Imaging Data
Model Display
(pixels)
Unit Cost
A 5,200 50,000
B 6,300 70,000
C 9,000 160,000
D 7,500 140,000
E 13,000 225,000
Assuming that pixel display is the independent variable and cost the
dependent variable, use the regression sheet to document the data.
1. What is your estimate of the cost of an MRI unit that displays a 12,500-pixel
image?
2. Determine the coefficient of determination (r2).
3. Determine whether to use this equation for estimating purposes. (yes/no)
EXERCISE #3: VOLUME CHEMICAL
You are involved in analyzing the relationship between the cost and the volume
of production. You have collected the following inflation‐adjusted data:
Table 3.12—Volume Chemical Inflation-Adjusted Data
Production Units Costs
700 $61,750
1,450 $64,450
1,500 $66,000
1,750 $69,438
2,100 $73,410
2,150 $75,720
3,050 $79,375
1. Estimate the cost to produce 2,000 units.
2. Determine the coefficient of determination (r2).
3. Determine whether to use this equation for estimating purposes. (yes/no