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Linear Regression Using Excel 2010 Linear Regression Using Excel ® 2010 Managerial Accounting Prepared by Diane Tanner University of North Florida Chapter.

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Presentation on theme: "Linear Regression Using Excel 2010 Linear Regression Using Excel ® 2010 Managerial Accounting Prepared by Diane Tanner University of North Florida Chapter."— Presentation transcript:

1 Linear Regression Using Excel 2010 Linear Regression Using Excel ® 2010 Managerial Accounting Prepared by Diane Tanner University of North Florida Chapter 6

2 Linear Regression  One of several cost estimation methods  Used by managers to predict costs at various activity levels  More accurate than other estimation methods  Because it uses all the data points  Fits a total cost line through the ‘best-fit’ data points Goal = create a cost equation TC = FC + VCx Y = mx + b Goal = create a cost equation TC = FC + VCx Y = mx + b 2

3 How to Run a Regression in Excel 2010 ® Step 1: Acquire cost information for all data points Step 2: Be sure the Data Analysis tools are installed Step 3: Click [Data] [Data Analysis] [Regression] Step 4: Select the total cost data for the ‘Y’ range. Step 5: Select the activity data for the ‘X’ range. Step 6: Designate the cell in which you want the regression to be placed in the output range. Note that Excel ® will extend the regression beneath and to the right of the cell you choose. 3 Excel generates output that uses all the data points.

4 Regression Using Excel 4 Example: Given the cost and sales data for Mix, Inc. use regression analysis in Excel ® to determine the regression equation: Example: Given the cost and sales data for Mix, Inc. use regression analysis in Excel ® to determine the regression equation: Cost Sales $60,000$120,000 $65,000$132,000 $73,000$168,000 $102,000$210,000 $108,000$235,000 Step 1: Type the data into Excel ®. Step 2: Assume the Data Analysis ToolPak is already installed. Step 3: Click [Data] [Data Analysis] [Regression] Step 4: Select the total cost data for the Y range. Step 5: Select the activity data for the X range.

5 Regression Using Excel 5 Cost function y = 0.44X + 5,841 Cost function y = 0.44X + 5,841 Step 6: Designate the cell in which you want the regression to be placed in the output range. Press OK. SUMMARY OUTPUT Regression Statistics Multiple R0.983352421 R Square0.966981985 Adjusted R Square0.955975979 Standard Error4607.904631 Observations5 ANOVA dfSSMSFSignific. F Regression11.87E+09 87.859490.002572 Residual36369835521232785 Total41.93E+09 Coefficients Standard Errort StatP-valueLower 95%Upper 95% Lower 95.0% Upper 95.0% Intercept5841.3651328340.9220.7003260.53415-20703.232385.9-20703.232385.9 X Variable 10.4379111840.0467199.3733390.0025720.2892310.5865910.2892310.586591

6 6 The End

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