Question

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	215	$5,500
February	210	5,740
March	380	5,800
April	625	8,675
May	750	9,000
June	630	9,760
July	400	6,200
August	350	6,155
September	300	5,980
October	330	6,010
November	200	4,950
December	150	4,500

Required:
3. Using the high-low method, calculate the store’s total fixed operating costs and variable operating cost per jersey.
4. Using the high-low method results, calculate the store’s expected operating cost if it printed 480 jerseys.
5. Perform a least-squares regression analysis on Leslie’s data.
6. Using the regression output, create a linear equation (y = a + bx) for estimating Leslie’s operating costs.
7. Using the least-squares regression results, calculate the store’s expected operating cost if it prints 625 jerseys.

Answer 1

3.
Variable Cost per unit = ($9000-4500)/(750-150) = $7.50 per Jersey
Fixed Costs = $9000 - 750 x 7.5 = $3375

4.
Cost for 480 Jersey's = $3375 + 480 x $7.5 = $6975

5.

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.94925
R Square	0.901076
Adjusted R Square	0.891184
Standard Error	551.9093
Observations	12
ANOVA
	df	SS	MS	F	Significance F
Regression	1	27745737	27745737	91.08794	2.43E-06
Residual	10	3046038	304603.8
Total	11	30791775
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	3414.056	362.5764	9.416103	2.75E-06	2606.186	4221.927	2606.186	4221.927
Number of Jerseys	8.216151	0.860871	9.544	2.43E-06	6.298011	10.13429	6.298011	10.13429

6. Total Cost = $3414.06 + $8.22 x Number of Jersey's

7. Cost for 625 Jerseys = $3414.06 + $8.22 x 625 = $8551.56