Least-Squares Regression

Computations
Appendix 2A

PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright2012byTheMcGrawHillCompanies,Inc.Allrightsreserved.
 2A-2

Learning Objective 8

Analyze a mixed cost

using a scattergraph plot
and the least-squares
regression method.
 2A-3

Simple Regression Analysis

Matrix,
Matrix, Inc.
Inc. wants
wants toto
know
know itsits average
average
fixed
fixed cost
cost and
and
variable
variable cost
cost per
per
meals
meals served.
served.
Using
Using the
the data
data to
to the
the
right,
right, lets
lets see
see how
how toto
do
do aa regression
regression using
using
Microsoft
Microsoft Excel.
Excel.
 2A-4

Simple Regression Using Excel

You
You will
will need
need three
three pieces
pieces of
of
information
information fromfrom your
your
regression
regression analysis:
analysis:
1.
1. Estimated
Estimated Variable
Variable Cost
Cost Per
Per
Unit
Unit (line
(line slope)
slope)
2.
2. Estimated
Estimated Fixed
Fixed Costs
Costs (line
(line
intercept)
intercept)
3.
3. Goodness
Goodness of of fit,
fit, or
or R
R22

To
Toget
get these
these three
three pieces
pieces
information
information wewe will
will need
need to
to
use
use three
three Excel
Excel functions.
functions.
SLOPE,
SLOPE, INTERCEPT,
INTERCEPT,and
and RSQ
RSQ
 2A-5

Simple Regression Using Excel

Place
Place your
your cursor
cursor in in
cell
cell F4
F4 and
and press
press the the
== key.
key. Click
Click on
on the the
pull
pull down
down menu
menu and and
scroll
scroll down
down toto More
More
Functions
Functions .. .. ..
 2A-6

Simple Regression Using Excel

Scroll
Scroll down
down toto the
the
Statistical
Statistical
functions.
functions. Now
Now
scroll
scroll down
down thethe
statistical
statistical
functions
functions until
until you
you
highlight
highlight
SLOPE
SLOPE
 2A-7

Simple Regression Using Excel

1. In the Known_ys box, enter C4:C19 for the range.

2. In the Known_xs box, enter D4:D19 for the range.
 2A-8

Simple Regression Using Excel

Here is the
estimate of the
slope of the line.

1. In the Known_ys box, enter C4:C19 for the range.

2. In the Known_xs box, enter D4:D19 for the range.
 2A-9

Simple Regression Using Excel

With
With your
your cursor
cursor in in
cell
cell F5,
F5, press
press the
the ==
key
key and
and gogo to
to the
the pull
pull
down
down menu
menu forfor
Special
Special Functions.
Functions.
Select
Select Statistical
Statistical and
and
scroll
scroll down
down to to
highlight
highlight the
the
INTERCEPT
INTERCEPT function.
function.
 2A-10

Simple Regression Using Excel

Here is the
estimate of the
fixed costs.

1. In the Known_ys box, enter C4:C19 for the range.

2. In the Known_xs box, enter D4:D19 for the range.
 2A-11

Simple Regression Using Excel

Finally,
Finally, we we will
will
determine
determine the the
goodness
goodness of of
fit
fit,, or
or R
R22,, by
by
using
using the the RSQ
RSQ
function.
function.
 2A-12

Simple Regression Using Excel

Here is the
estimate of R2.

1. In the Known_ys box, enter C4:C19 for the range.

2. In the Known_xs box, enter D4:D19 for the range.