DATA INPUT

Hours of
Operation
550
600
700
500
450
400

Month
January
February
March
April
May
June

Utility Cost
1,620
1,700
1,900
1,600
1,350
1,300

SOLUTION
3. Least- squares regression:

Fixed- and variable-cost components:*

Monthly fixed cost (intercept):

501

Variable cost (slope):

2.02 per hour of operation

* The intercept parameter (a) computed above is the cost per month.
The slope parameter (b) calculated above is cost per hour of operation.
3. Least-squares regression equation for the airport's costs:
Total monthly cost=

501

2.02 per hour of operation

501

2.02

4. Cost prediction:
Total monthly cost=
5. Calculation of R2:
R2:

0.9517761

300

$ 1,107