{"id":294,"date":"2018-04-16T23:34:28","date_gmt":"2018-04-16T23:34:28","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/?post_type=chapter&#038;p=294"},"modified":"2024-04-29T16:48:10","modified_gmt":"2024-04-29T16:48:10","slug":"regression-method","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/regression-method\/","title":{"raw":"Least Squares Regression Method","rendered":"Least Squares Regression Method"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Use the least-squares regression method to create a regression line on a graph of cost data<\/li>\r\n<\/ul>\r\n<\/div>\r\nThis method uses all of the data available to separate the fixed and variable portions of a mixed cost. A regression line is fitted into the data using the following formula:\r\n<p style=\"text-align: center;\">Y= a + bX<\/p>\r\n<p style=\"padding-left: 30px;\">Y= Maintenance costs<\/p>\r\n<p style=\"padding-left: 30px;\">X= Number of dogs groomed<\/p>\r\n<p style=\"padding-left: 30px;\">a= the total fixed cost<\/p>\r\n<p style=\"padding-left: 30px;\">b= the variable cost per unit of activity<\/p>\r\nSo using <a href=\"http:\/\/www.socscistatistics.com\/tests\/regression\/Default.aspx\" target=\"_blank\" rel=\"noopener\">this calculator<\/a>.\r\n\r\nIf you use the data from the <a href=\"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/high-low-method-and-mixed-costs\/\" target=\"_blank\" rel=\"noopener\">dog groomer example<\/a> you should be able to calculate the following chart:\r\n\r\n<img class=\"alignnone wp-image-1424 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/2985\/2018\/04\/17003225\/Screen-Shot-2018-07-16-at-5.32.03-PM.png\" alt=\"A graph depicting a regression line with &quot;independent&quot; on the x-axis and &quot;dependent&quot; on the y-axis. The graph is trending in a linear progression. \" width=\"390\" height=\"340\" \/>\r\n\r\nThis method is more accurate, using all of the available data. The table below shows the difference in calculation using the two methods:\r\n<table style=\"border-collapse: collapse; width: 100%;\" border=\"1\">\r\n<thead>\r\n<tr>\r\n<th style=\"width: 33.3333%;\">Costs<\/th>\r\n<th style=\"width: 33.3333%;\">High-low<\/th>\r\n<th style=\"width: 33.3333%;\">Least Squares Regression Method<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td style=\"width: 33.3333%;\">Variable cost estimate per dog groomed<\/td>\r\n<td style=\"width: 33.3333%;\">$.080<\/td>\r\n<td style=\"width: 33.3333%;\">$.074<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 33.3333%;\">Fixed cost estimate per month<\/td>\r\n<td style=\"width: 33.3333%;\">$340<\/td>\r\n<td style=\"width: 33.3333%;\">$362.24<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n&nbsp;\r\n<div class=\"\u201ctextbox\">\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/01ae169b-abb0-42d4-8539-b470a24e888e\r\n\r\n<\/div>\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Use the least-squares regression method to create a regression line on a graph of cost data<\/li>\n<\/ul>\n<\/div>\n<p>This method uses all of the data available to separate the fixed and variable portions of a mixed cost. A regression line is fitted into the data using the following formula:<\/p>\n<p style=\"text-align: center;\">Y= a + bX<\/p>\n<p style=\"padding-left: 30px;\">Y= Maintenance costs<\/p>\n<p style=\"padding-left: 30px;\">X= Number of dogs groomed<\/p>\n<p style=\"padding-left: 30px;\">a= the total fixed cost<\/p>\n<p style=\"padding-left: 30px;\">b= the variable cost per unit of activity<\/p>\n<p>So using <a href=\"http:\/\/www.socscistatistics.com\/tests\/regression\/Default.aspx\" target=\"_blank\" rel=\"noopener\">this calculator<\/a>.<\/p>\n<p>If you use the data from the <a href=\"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/high-low-method-and-mixed-costs\/\" target=\"_blank\" rel=\"noopener\">dog groomer example<\/a> you should be able to calculate the following chart:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-1424 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/2985\/2018\/04\/17003225\/Screen-Shot-2018-07-16-at-5.32.03-PM.png\" alt=\"A graph depicting a regression line with &quot;independent&quot; on the x-axis and &quot;dependent&quot; on the y-axis. The graph is trending in a linear progression.\" width=\"390\" height=\"340\" \/><\/p>\n<p>This method is more accurate, using all of the available data. The table below shows the difference in calculation using the two methods:<\/p>\n<table style=\"border-collapse: collapse; width: 100%;\">\n<thead>\n<tr>\n<th style=\"width: 33.3333%;\">Costs<\/th>\n<th style=\"width: 33.3333%;\">High-low<\/th>\n<th style=\"width: 33.3333%;\">Least Squares Regression Method<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"width: 33.3333%;\">Variable cost estimate per dog groomed<\/td>\n<td style=\"width: 33.3333%;\">$.080<\/td>\n<td style=\"width: 33.3333%;\">$.074<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 33.3333%;\">Fixed cost estimate per month<\/td>\n<td style=\"width: 33.3333%;\">$340<\/td>\n<td style=\"width: 33.3333%;\">$362.24<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<div class=\"\u201ctextbox\">\n<div class=\"textbox tryit\">\n<h3>Practice Questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_01ae169b-abb0-42d4-8539-b470a24e888e\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/01ae169b-abb0-42d4-8539-b470a24e888e?iframe_resize_id=assessment_practice_id_01ae169b-abb0-42d4-8539-b470a24e888e\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe><\/p>\n<\/div>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-294\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Least Squares Regression Method. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":62559,"menu_order":11,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Least Squares Regression Method\",\"author\":\"Freedom Learning Group\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"bd56768f-15fc-41de-9afa-e4f7f4504c38, d091469c-5ada-492f-92e6-7c927ea21416","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-294","chapter","type-chapter","status-publish","hentry"],"part":106,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/294","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/users\/62559"}],"version-history":[{"count":16,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/294\/revisions"}],"predecessor-version":[{"id":4063,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/294\/revisions\/4063"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/parts\/106"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/294\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/media?parent=294"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapter-type?post=294"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/contributor?post=294"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/license?post=294"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}