Question

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5) Leslie Sporting Goods is a locally owned store that specializes in printing team jerseys. The majority of its business comes from orders for various local teams and organizations. While Leslie’s prints everything from bowling team jerseys to fraternity/sorority apparel to special event shirts, summer league baseball and softball team jerseys are the company’s biggest source of revenue.

A portion of Leslie’s operating information for the company’s last year follows:

	Number of	Operating
Month	Jerseys Printed	Cost
January	170	$5,790
February	190	5,825
March	545	8,660
April	725	9,760
May	645	9,260
June	425	6,210
July	335	6,145
August	260	5,925
September	125	4,810
October	315	6,010
November	260	5,970
December	150	4,950

a) Using the high-low method, calculate the store’s total fixed operating costs and variable operating cost per jersey. (Do not round your intermediate calculations. Round your "Variable Cost" answer to 2 decimal places and "Fixed Cost" answer to the nearest whole number.)

Variable cost per jersey: ____

Fixed Cost: ____

b) Using the high-low method results, calculate the store’s expected operating cost if it printed 480 jerseys. (Do not round your intermediate calculations. Round your answer to the nearest whole number.)

Total Cost: ____

c) Perform a least-squares regression analysis on Leslie’s data. (Use Microsoft Excel or a statistical package to find the coefficients using least-squares regression. Round your answers to 2 decimal places.)

Intercept: ____

X variable 1: ____

d) Using the regression output, create a linear equation (y = a + bx) for estimating Leslie’s operating costs. (Round your answers to 2 decimal places.)

Total Cost = ____ + _____ (number of jerseys)

e) Using the least-squares regression results, calculate the store’s expected operating cost if it prints 620 jerseys. (Round your intermediate calculations and final answer to 2 decimal places.)

Total Cost: ____

Answer 1

a)
	Number of Jerseys Printed	Operating Cost
High	725	9,760
Low	125	4,810
Difference	600	4950
Variable cost per jersey: $4950/600	$                                     8.25
Fixed Cost = $9760 - (725 x $8.25)	$                                   3,779
b)
Y = $3779 + $8.25 x # of Jerseys Printed
Y = $3779 + $8.25 x  480	$                                   7,739
c)
SUMMARY OUTPUT
Regression Statistics
Multiple R	0.962818256
R Square	0.927018994
Adjusted R Square	0.919720894
Standard Error	468.2780907
Observations	12
ANOVA
	df	SS	MS	F	Significance F
Regression	1	27853929.2	27853929.2	127.021954	5.2577E-07
Residual	10	2192843.7	219284.37
Total	11	30046772.9
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	3852.909368	279.463737	13.7867954	7.8411E-08	3230.22536	4475.59338	3230.22536	4475.59338
X Variable 1	7.980720768	0.70811325	11.2704017	5.2577E-07	6.40294612	9.55849541	6.40294612	9.55849541
d)
Total Cost = 3852.91 + $7.98  x (number of jerseys)
e)
Total Cost = 3852.91 + $7.98  x 620	$                              8,800.96