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high 8211 l o w and r eg r e s sion app r oaches bildt 214 stersund an wishes to set 736871

High– l o w and r eg r e s sion app r oaches.

Bildt Östersund AN wishes to set a flexible budget for its power costs, which are primarily a function of machine hours worked. Data for the first four periods follows:

Period Power costs ( Y ) Machine hours ( X )

1

SKr 350

200

2

450

300

3

300

100

4

500

400

Required

1 Plot the relationship between power costs and machine hours.

2 Calculate the constant a and slope coefficient b of the function y = a + bX using (i) the high–low approach, and (ii) the regression approach. Comment on the results.

3 For the regression approach, calculate the coefficient of determination, r 2 . Comment on the result.

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