Question

Big Mike’s, a large hardware store, has gathered data on its overhead activities and associated costs for the past 10 months. Nizam Sanjay, a member of the controller’s department, believes that overhead activities and costs should be classified into groups that have the same driver. He has decided that unloading incoming goods, counting goods, and inspecting goods can be grouped together as a more general receiving activity, since these three activities are all driven by the number of receiving orders. The 10 months of data shown below have been gathered for the receiving activity. Month Receiving Orders Receiving Cost 1 1,000 $12,170 2 1,340 12,940 3 1,150 13,750 4 900 9,930 5 1,350 15,070 6 1,400 14,145 7 1,600 16,640 8 1,490 14,800 9 1,800 17,940 10 1,700 15,000 Required: 1. Choose the correct scatter graph that represents the data provided above. a. b. c. d. The correct answer is c 2. Select two points (1 and 8) that make the best fit, and compute a cost formula for receiving costs. Round intermediate calculations to the nearest cent. Round the intercept to the nearest dollar and round the slope to the nearest cent. Y = $ + $X 3. Using the high-low method, prepare a cost formula for the receiving activity. Round the intercept to the nearest dollar and round the slope to the nearest cent. Y = $ + $X 4. Using the method of least squares, prepare a cost formula for the receiving activity. Round the intercept to the nearest dollar and round the slope to the nearest cent. Y = $ + $X What is the coefficient of determination? Round your answer to two decimal places. Adjusted R2 =

Answer 1

Part 2

Month	orders	cost
1	1000	12170
8	1490	14800

TC = Vx + F

14800=1490V + F

12170 = 1000V + F

2630 = 490V

V = 5.37

14800=(1490*5.37) + F

F = 14800-8001 = $6799

Therefore,

Y = $6799 + $5.37X

Part 3

Activity	orders	cost
Highest	1800	17940
Lowest	900	9930

TC = Vx + F

17940=1800V + F

9930 = 900V + F

8010 = 900V

V = 8.90

17940=(1800*8.90) + F

F = 17940-16020 = $1920

Therefore,

Y = $1920+ $8.90X

Part 4

Y = $4638+ $6.99X

Adjusted R2 = 0.80 or (79.84% in case of percentage form)

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.905998
R Square	0.820832
Adjusted R Square	0.798436
Standard Error	1013.121
Observations	10
ANOVA
	df	SS	MS	F	Significance F
Regression	1	37618885	37618885	36.65077	0.000305
Residual	8	8211318	1026415
Total	9	45830203
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	4637.984	1617.856	2.866748	0.020933	907.202	8368.766	907.202	8368.766
X Variable 1	6.992364	1.155001	6.053988	0.000305	4.328926	9.655802	4.328926	9.655802