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What level of sales are required per month for the firm

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Question - The Deli City Sandwich Shop tries to maintain a constant markup on direct costs. Consequently it was felt that their cost function could be stated in terms relative to salesdoll.ws. In fact, a regression based on 18 months of cost and revenue data produced the following cost equation cost - 0.6 sales + $2,400 per month.

The equation had an R2 of .87 and the standard error of the estimate was $245.

Required -

1. What is the 90% confidence interval on monthly net income if sales average $7,000 per month?

1. If sales are $8,000 in a month, how confident can the firm be of earning more than $500?

2. What level of sales are required per month for the firm to be 90% confident of earning at least $1,000?

Reference no: EM133174566

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