Question

Caiman Distribution Partners is the Brazilian distribution company of a U.S. consumer products firm. Inflation in Brazil has made bidding and budgeting difficult for marketing managers trying to penetrate some of the country's rural regions. The company expects to distribute 450,000 cases of products in Brazil next month. The controller has classified operating costs (excluding costs of the distributed product) as follows.

Account	Operating Cost			Behavior
Supplies	$	604,000		All variable
Supervision		233,000		$	134,000	Fixed
Truck expense		1,270,000		$	180,000	Fixed
Building leases		844,000		$	540,000	Fixed
Utilities		208,000		$	108,000	Fixed
Warehouse labor		853,000		$	151,000	Fixed
Equipment leases		760,000		$	596,000	Fixed
Data processing equipment		929,000		All fixed
Other		862,000		$	415,000	Fixed
Total	$	6,563,000

Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to the managers that they should incorporate information from a published index of Brazilian prices in the distribution sector to forecast overhead in a manner more likely to capture the economics of the business.

 

Following instructions from the corporate offices, the controller's office in Brazil collected the following information for monthly operations from last year.

 

Month	Cases	Price Index	Operating Costs
1	303,000	115	$5,699,147
2	343,000	122	5,806,646
3	304,000	116	5,849,913
4	389,000	124	5,927,625
5	382,000	118	5,939,143
6	355,000	130	6,043,372
7	394,000	133	5,918,503
8	429,000	129	6,133,876
9	374,000	123	6,126,138
10	416,000	132	6,186,633
11	411,000	130	6,208,807
12	430,000	138	6,362,263

These data are considered representative for both past and future operations in Brazil.

d-1. Enter the regression coefficients.

d-2. Compute the estimation of operating costs assuming that 450,000 cases will be shipped next month by using the results of a multiple regression of operating costs on cases shipped and the price level. Assume a price level of 144 for next month.

Enter the regression coefficients. Run a multiple regression analysis based on operating costs on cases shipped and the price level. (Round "Cases" to 5 decimal places and "Price Index" to 5 decimal places.)

Intercept: 

Cases:

Price Index:

Compute the estimation of operating costs assuming that 450,000 cases will be shipped next month by using the results of a multiple regression of operating costs on cases shipped and the price level. Assume a price level of 144 for next month. (Round the case coefficient to 5 decimal places and the price index coefficient to 2 decimal places. Round the final answer to the nearest whole dollar amount.)

Estimate of operating cost: