Solution-Develop a cost-estimating equation for total

Develop a cost-estimating equation for total monthly costs

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Reference no: EM132922427

Question - High-Low and Scatter Diagrams with Implications for Regression - Midnight Cookie Company produces and delivers gourmet cookies and ice cream until 1:30 a.m. from its three Seattle area locations. Presented is monthly cost and sales information for cookies at one of Midnight's locations.

Month	Sales (Dozens)	Total Costs
January	6,800	30,650
February	7,800	35,336
March	5,500	29,700
April	1,000	25,000
May	6,100	30,600
June	4,500	28,670

Required -

a. Using the high-low method, develop a cost-estimating equation for total monthly costs.

b. 1. Plot the equation developed in requirement (a).

2. Using the same graph, develop a scatter diagram of all observations for the cookie shop. Select representative high and low values and draw a second cost-estimating equation.

c. Which is a better predictor of future costs? Why?

d. If you decided to develop a cost-estimating equation using least-squares regression analysis, should you include all the observations? Why or why not?

e. Mention two reasons that the least-squares regression is superior to the high-low and scatter diagram methods of cost estimation.

Reference no: EM132922427

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Develop a cost-estimating equation for total monthly costs

Reference no: EM132922427

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