The method of least squares was used to develop a cost equation to predict the c
ID: 2933515 • Letter: T
Question
The method of least squares was used to develop a cost equation to predict the cost of maintenance. Monthly data for the past four years were used for the regression. The following computer output was received:
Intercept $5,750
Slope 16
Coefficient of correlation 0.89
Standard error of the estimate $168
The independent variable was “number of maintenance hours.”
Predict the cost of maintenance if 650 maintenance hours are to be worked next month.
A step-by-step on how to predict the following month's cost of maintenance would be super helpful! Not sure how to get started.
Explanation / Answer
We are given Slope and intercept value so we can do least Square equation using Slope and intercept .
Y = intercept + Slope * X
Y= cost of maintenance
X=maintenance hours
Then least square equation will be
cost of maintenance = 5,750 + 16 * maintenance hours
USing this least Square equation we Predict the cost of maintenance if 650 maintenance hours are to be worked next month.
cost of maintenance = 5,750 + 16 * maintenance hours
= 5750 +16 * 650
= 5750 +10400
=16150
cost of maintenance if 650 maintenance hours are to be worked next month is $ 16150