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Thane Company is interested in establishing the relationship between electricity costs and machine hours. Data have been collected and a regression analysis prepared using Excel. The monthly data and the regression output follow:
| Month | Machine Hours | Electricity Costs | ||
| January | 3,400 | $ | 18,850 | |
| February | 3,800 | $ | 21,900 | |
| March | 2,800 | $ | 13,950 | |
| April | 4,000 | $ | 23,900 | |
| May | 4,700 | $ | 28,700 | |
| June | 4,200 | $ | 22,900 | |
| July | 5,300 | $ | 25,200 | |
| August | 4,400 | $ | 23,200 | |
| September | 2,900 | $ | 16,400 | |
| October | 4,600 | $ | 26,900 | |
| November | 6,500 | $ | 31,900 | |
| December | 5,800 | $ | 28,200 | |
| Summary Output | |
| Regression Statistics | |
| Multiple R | .928 |
| R Square | .862 |
| Adjusted R2 | .848 |
| Standard Error | 2,039.35 |
| Observations | 12.00 |
| Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | |
| Intercept | 4,492.22 | 2,479.75 | 1.81 | 0.10 | (1,033.00) | 10,017.44 |
| Machine Hours | 4.35 | 0.55 | 7.89 | 0.00 | 3.12 | 5.58 |
If the controller uses regression analysis to estimate costs, the cost equation for electricity cost is:
Cost = $4,492.22 + $2,479.75 × Machine-hours.
Cost = $2,479.75 + $0.55 × Machine-hours.
Cost = $4,492.22 + $4.35 × Machine-hours.
Cost = $2,039.35 + $12.00 × Machine-hours.
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