Simple Regression.
The European Engine Company (EEC) is a multi-national manufacturer of small gasoline and diesel motors. EEC has estimated the following cost experience for a new 3.5 hp engine over a sample of 122 observations:
COST = $8,500 + $32 OUTPUT
|
Predictor
|
Coef
|
Stdev
|
t ratio
|
|
Constant
|
8,500
|
5,000
|
1.7
|
|
OUTPUT
|
32
|
8
|
4.0
|
|
|
|
|
|
|
SEE = $2,500
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R2 = 75%
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R‾2 = 74.8%
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F statistic = 360
|
Where COST is the dependent Y variable and OUTPUT is the independent X-variable.
A. Fully interpret these simple regression results.
B. Describe this cost category as fixed or variable based upon the simple regression results described previously.