Reference no: EM13340770

Q 1.

CRSL is continuing to re-evaluate all aspects of the business and would like you to look into staffing costs. Below is a summary of monthly staff and customer numbers and staff costs. 

 

	Staff Number	Number of customers	Staff cost ($)
January	20	700	27 800
February	22	250	14 000
March	10	200	12 000
April	20	500	20 000
May	24	650	23 800
June	28	450	18 400
July	16	50	20 400
August	14	150	8 200
September	24	350	18 800
October	24	600	22 200
November	16	300	16 600
December	32	750	32 200

 CRSL's relevant range has been estimated to be between 300 and 600 customers.

 

Required:

a) Draw a scatter diagram of CRSL customers and staff costs and mark the relevant range 
b) Use the high-low method to estimate the behaviour of CRSL staff cost based on customer numbers within the relevant range. Use an equation to express the results of this estimation method.

c) Using Excel or a similar program construct a regression analysis to estimate:

i) The equation to predict staff costs based on the number of visitors within the relevant range
ii) Based on the equation in c i) what would the staff cost be with 400 visitors per month
iii) Using both activities - number of visitors and staff numbers, determine what the staff cost, within the relevant range would be.

d) Does the inclusion of the additional cost driver (number of staff) improve the regression model? Explain your answer?

e) Of the three methods - high-low, single regression and multiple regression - which method would you be most confident in presenting to the Board of Directors? Explain your answer?