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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 © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Least-Squares Regression Computations Appendix 2A

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2A-2 Learning Objective 8 Analyze a mixed cost using a scattergraph plot and the least-squares regression method.

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2A-3 Simple Regression Analysis Matrix, Inc. wants to know its average fixed cost and variable cost per meals served. Using the data to the right, let’s see how to do a regression using Microsoft Excel. Matrix, Inc. wants to know its average fixed cost and variable cost per meals served. Using the data to the right, let’s see how to do a regression using Microsoft Excel.

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2A-4 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 R 2 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 R 2 To get these three pieces information we will need to use three Excel functions. SLOPE, INTERCEPT, and RSQ To get these three pieces information we will need to use three Excel functions. SLOPE, INTERCEPT, and RSQ

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2A-5 Simple Regression Using Excel Place your cursor in cell F4 and press the = key. Click on the pull down menu and scroll down to “More Functions...”

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2A-6 Scroll down to the “Statistical” functions. Now scroll down the statistical functions until you highlight “SLOPE” Simple Regression Using Excel

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2A-7 1. In the Known_y’s box, enter C4:C19 for the range. 2. In the Known_x’s box, enter D4:D19 for the range. 1. In the Known_y’s box, enter C4:C19 for the range. 2. In the Known_x’s box, enter D4:D19 for the range. Simple Regression Using Excel

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2A-8 Here is the estimate of the slope of the line. 1. In the Known_y’s box, enter C4:C19 for the range. 2. In the Known_x’s box, enter D4:D19 for the range. 1. In the Known_y’s box, enter C4:C19 for the range. 2. In the Known_x’s box, enter D4:D19 for the range. Simple Regression Using Excel

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2A-9 With your cursor in cell F5, press the = key and go to the pull down menu for “Special Functions.” Select Statistical and scroll down to highlight the INTERCEPT function. Simple Regression Using Excel

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2A-10 1. In the Known_y’s box, enter C4:C19 for the range. 2. In the Known_x’s box, enter D4:D19 for the range. 1. In the Known_y’s box, enter C4:C19 for the range. 2. In the Known_x’s box, enter D4:D19 for the range. Here is the estimate of the fixed costs. Simple Regression Using Excel

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2A-11 Finally, we will determine the “goodness of fit”, or R 2, by using the RSQ function. Simple Regression Using Excel

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2A-12 1. In the Known_y’s box, enter C4:C19 for the range. 2. In the Known_x’s box, enter D4:D19 for the range. 1. In the Known_y’s box, enter C4:C19 for the range. 2. In the Known_x’s box, enter D4:D19 for the range. Here is the estimate of R 2. Simple Regression Using Excel

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CHAPTER 2 PowerPoint Author: LuAnn Bean, Ph.D., CPA, CIA, CFE Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution.

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