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- 1. 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 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Least-Squares Regression Computations Appendix 2A
- 2. 2A-2 Learning Objective 8 Analyze a mixed cost using a scattergraph plot and the least-squares regression method.
- 3. 2A-3 The Data Set Matrix, Inc. wants toMatrix, Inc. wants to know its averageknow its average fixed cost andfixed cost and variable cost pervariable cost per meals served.meals served. Using the data to theUsing the data to the right, let’s see how toright, let’s see how to do a Scattergraphdo a Scattergraph plot using Microsoftplot using Microsoft Excel.Excel. Matrix, Inc. wants toMatrix, Inc. wants to know its averageknow its average fixed cost andfixed cost and variable cost pervariable cost per meals served.meals served. Using the data to theUsing the data to the right, let’s see how toright, let’s see how to do a Scattergraphdo a Scattergraph plot using Microsoftplot using Microsoft Excel.Excel.
- 4. 2A-4 Scattergraph Plot Highlight Cells C4 through D19. from the Insert Menu in Excel, select Graph. and the Scattergraph with no lines. You should produce a graph that looks similar to the one shown on the right. Highlight Cells C4 through D19. from the Insert Menu in Excel, select Graph. and the Scattergraph with no lines. You should produce a graph that looks similar to the one shown on the right.
- 5. 2A-5 Scattergraph Plot Right click on any of the grid values and enter the text as shown. The X axis should read “Units (Meals), and the Y axis should read Total Cost. Right click on any of the grid values and enter the text as shown. The X axis should read “Units (Meals), and the Y axis should read Total Cost.
- 6. 2A-6 Scattergraph Plot Right click on any data point in the scattergraph plot and selecting “Add Trendline” from the graph submenu. The relationship appears to be linear, so we can apply the regression model. Right click on any data point in the scattergraph plot and selecting “Add Trendline” from the graph submenu. The relationship appears to be linear, so we can apply the regression model.
- 7. 2A-7 Simple Regression Using Excel You will need three pieces of information from your regression analysis: 1. Estimated Variable Cost Per Unit (line slope) 2. Estimated Fixed Costs (line intercept) 3. Goodness of fit, or R2 You will need three pieces of information from your regression analysis: 1. Estimated Variable Cost Per Unit (line slope) 2. Estimated Fixed Costs (line intercept) 3. Goodness of fit, or R2 To get these three pieces information we will need to use three Excel functions in the Statistical Group of special functions. SLOPE, INTERCEPT, and RSQ To get these three pieces information we will need to use three Excel functions in the Statistical Group of special functions. SLOPE, INTERCEPT, and RSQ
- 8. 2A-8 Simple Regression Using Excel Place your cursor in cell F4 and press the = key.Place your cursor in cell F4 and press the = key. Click on the pull down menu and scroll down toClick on the pull down menu and scroll down to “Statistical” and scroll until you see “Slope.”“Statistical” and scroll until you see “Slope.” Place your cursor in cell F4 and press the = key.Place your cursor in cell F4 and press the = key. Click on the pull down menu and scroll down toClick on the pull down menu and scroll down to “Statistical” and scroll until you see “Slope.”“Statistical” and scroll until you see “Slope.”
- 9. 2A-9 Simple Regression Using Excel For “Known_y’s” highlight cells D4 through D19, andFor “Known_y’s” highlight cells D4 through D19, and for “Known_x’s” highlight cells C4 through C19.for “Known_x’s” highlight cells C4 through C19. Notice the Slope is calculated at 2.7684.Notice the Slope is calculated at 2.7684. For “Known_y’s” highlight cells D4 through D19, andFor “Known_y’s” highlight cells D4 through D19, and for “Known_x’s” highlight cells C4 through C19.for “Known_x’s” highlight cells C4 through C19. Notice the Slope is calculated at 2.7684.Notice the Slope is calculated at 2.7684.
- 10. 2A-10 Simple Regression Using Excel Place your cursor in cell F5 and press the = key.Place your cursor in cell F5 and press the = key. Click on the pull down menu and scroll down toClick on the pull down menu and scroll down to “Statistical” and scroll until you see “Intercept.”“Statistical” and scroll until you see “Intercept.” Place your cursor in cell F5 and press the = key.Place your cursor in cell F5 and press the = key. Click on the pull down menu and scroll down toClick on the pull down menu and scroll down to “Statistical” and scroll until you see “Intercept.”“Statistical” and scroll until you see “Intercept.”
- 11. 2A-11 1. In the Known_y’s box, enter D4:D19 for the range. 2. In the Known_x’s box, enter C4:C19 for the range. 1. In the Known_y’s box, enter D4:D19 for the range. 2. In the Known_x’s box, enter C4:C19 for the range. Simple Regression Using Excel Here is theHere is the estimate of theestimate of the fixed costs.fixed costs.
- 12. 2A-12 Finally, we will determine the “Finally, we will determine the “goodness of fitgoodness of fit”, or”, or RR22 , by, by using theusing the RSQRSQ function. Move your cursor to Cell F6.function. Move your cursor to Cell F6. Finally, we will determine the “Finally, we will determine the “goodness of fitgoodness of fit”, or”, or RR22 , by, by using theusing the RSQRSQ function. Move your cursor to Cell F6.function. Move your cursor to Cell F6. Simple Regression Using Excel
- 13. 2A-13 1. In the Known_y’s box, enter D4:D19 for the range. 2. In the Known_x’s box, enter C4:C19 for the range. 1. In the Known_y’s box, enter D4:D19 for the range. 2. In the Known_x’s box, enter C4:C19 for the range. Simple Regression Using Excel Here is theHere is the estimate ofestimate of RR22 ..
- 14. 2A-14 Simple Regression Using Excel Notice that Excel depicts its least-squares regression equation as Y = bX + a. We can easily rearrange with equation. Notice that Excel depicts its least-squares regression equation as Y = bX + a. We can easily rearrange with equation.
- 15. 2A-15 End of Appendix 2A

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