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6.2: Least Squares Regression Method

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    Learning Outcomes

    • Use the least-squares regression method to create a regression line on a graph of cost data

    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:

    Y= a + bX

    Y= Maintenance costs

    X= Number of dogs groomed

    a= the total fixed cost

    b= the variable cost per unit of activity

    So using a calculator available HERE.

    If you use the data from the dog groomer example you should be able to calculate the following chart:

    A graph depicting a regression line with "independent" on the x-axis and "dependent" on the y-axis. The graph is trending in a linear progression.

    This method is more accurate, using all of the available data. The table below shows the difference in calculation using the two methods:

    Costs High-low Least Squares Regression Method
    Variable cost estimate per dog groomed $.080 $.074
    Fixed cost estimate per month $340 $362.24


    CC licensed content, Original
    • Least Squares Regression Method. Authored by: Freedom Learning Group. Provided by: Lumen Learning. License: CC BY: Attribution

    6.2: Least Squares Regression Method is shared under a not declared license and was authored, remixed, and/or curated by LibreTexts.

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