Reference no: EM132659141

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

                                         Staff number                  Number of meals                         Staff cost ($)
January                              20                                 700                                   27800
February                             22                                250                                    14000
March                                10                                  200                                  12000
April                                    20                                    500                                20000
May                                     24                                 650                                 23800
June                                      28                                   450                               18400
July                                       16                                  50                                20400
August                                   14                                150                                 8200
September                                 24                            350                               18800
October                                    24                           600                                22200
November                                 16                            300                              16600
December                               32                              750                           32200

The Pork Bellies relevant range has been estimated to be between 300 and 600 meals.

Required:

Question 1: Draw a scatter diagram of Pork Bellies meals and staff costs and mark the relevant range

Question 2: Use the high-low method to estimate the behaviour of Pork Bellies staff costs based on meal numbers within the relevant range. Use an equation to express the results of this estimation method.

Question 3: Using excel or a similar program construct a regression analysis to estimate:

1. The equation to predict staff costs based on the number of meals within the relevant range
2. Based on the equation in 3 a) what would the staff cost be with 400 meals per month 
3. Using both activities - number of meals and staff numbers, determine what the staff cost, within the relevant range, would be. 
4. Does the inclusion of the additional cost driver (staff number) improve the model? Explain your answer