Question

Return to question Tempe Office Services and Supplies (TOSS) provides various products and services in the Tempe Research Park, home to numerous high-tech and bio-tech companies. Making color copies is one of its most popular and profitable services. The controller performed a regression analysis of data from the Color Copy Department with the following results: 10 points 561.22689 0.966478 Intercept R square Number of observations X coefficient 0.05852 The regression output was based on the following data: Month July August September October November December Number Color Copy of Color Department Copies Costs 24,350 $1,935 17,200 1,550 24,950 2,015 23,400 1,975 21,550 1,855 18,550 1,645 Required: 1. What is the variable cost per color copy for TOSS? 2. What is the fixed cost for the Color Copy Department? 3. Based on the regression output obtained by the controller, what cost formula should be used to estimate future total costs for the Color Copy Department? Enter answer as an equation in the form of y= a + bx. 5-a. Use the high-low method to estimate the variable and fixed costs for the Color Copy Department. 5-b. What cost formula should be used based on your analysis? Enter answer as an equation in the form of y= a + bx. 6. If 21,900 copies are made during January, what is the total cost predicted by each method? X Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3 Req 5a Reg 5b Reg 6 If 21,900 copies are made during January, what is the total cost predicted by each method? (Use the answers that you provided in parts 3 and 5-b and round your final answers to 2 decimal places.) Regression High-Low Total Cost 720.36 1,832.00 $

Answer 1

In Regression Equation results, X coefficient denotes the variable cost per color copy. So, 1) $0.05852 Variable cost per color copy is calculated to be: In Regression Equation results, Intercept denotes the fixed costs. So, 2) $561.22689 Fixed costs for color copy dept. is calculated to be: Estimated Cost function for color copy department cost (using regression analysis) is: 3) Total department cost = Fixed costs + (Variable cost per color copy x Number of copies) ==> y = $561.22689 + $0.05852X At 24950 color copies, Color Copy 5-a) # of Color Month Dept. $2,015 ($1,497) $518 Color Copy Dept. Costs Less: Variable utility costs Fixed department costs Copies Costs [24950 x $0.06] $1,935 $1,550 $2,015 July August September 24,350 17,200 24,950 At 17200 color copies, October $1,975 $1,855 $1,645 23,400 November 21,550 $1,550 ($1,032) $518 Color Copy Dept. Costs Less: Variable utility costs Fixed department costs December 18,550 [17200 x $0.06]

Using High-Low Method: Color Copy # of Color Particulars Dept. Copies Costs High $2,015 $1,550 $465 24,950 Low 17,200 ($2015 - $1550) Difference 7,750 (24950-17200) Variable department costs $0.06 per color copy (= Difference in department cost / Difference in number of color copies = $465 / 7750 color copies = $0.06] 5-b) Estimated Cost function for color copy department cost (using high-low method) is: Total department cost = Fixed costs + (Variable cost per color copy x Number of copies) ==> y = $518 + $0.06X Regression $0.05852 High-Low $0.06 per color copy --> (a) 21,900 --> (b) $1,314.00 --> (a) x (b) Variable department costs 6) Number of color copies made Total variable department costs 21,900 $1,281.59 $561.22689 Add: Fixed department costs $518.00 $1,842.81 $1,832.00 Total department costs estimated