The estimate of the fixed portion of maintenance costs is equal to $160.
- Let X be the production volume.
- Let Y be the maintenance cost.
What is a least-squares regression?
A least-squares regression line can be defined as a standard technique in regression analysis and statistics that is used to make the vertical distance obtained from the data points running to a regression line become very minimal or as small as possible.
First of all, we would calculate the variable cost from the given data by using this formula:
[tex]V=\frac{\sum _{XY} -(\sum _{X} \times \frac{\sum _{Y}}{n})}{\sum _{X}^2 -\frac{(\sum _{X}^2)^2}{n} } \\\\V=\frac{192725 -(575 \times \frac{1555}{5})}{76775 -\frac{(575)^2}{5} }\\\\V=\frac{192725 -178825}{76775 -66125} \\\\V=\frac{13900}{10650}[/tex]
V = $1.30.
For the fixed portion:
[tex]F=(\frac{\sum Y}{n} -V \frac{\sum Y}{n})\\\\F=(\frac{1555}{5} -1.31 \times \frac{575}{5})\\\\F = 311 -150.65[/tex]
F = 160.35 ≈ $160.
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