Question

Christina Mitchell, owner of Beautiful Arrangements, operates a local chain of flower shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Ms. Mitchell wants to set the delivery fee based on the distance driven to deliver the arrangements. Ms. Mitchell gives you this set of data from the last seven months:

Month	Van Operating Costs	Miles Driven
January	$5,460	15,800
February	5,748	17,300
March	4,935	14,600
April	5,310	16,000
May	5,830	17,100
June	5,420	15,400
July	5,020	14,500

February and May are Beautiful Arrangements’ biggest months due to Valentine’s Day and Mother’s Day.

a. Plot the data (scattergraph in Excel).

b. Use high-low method to determine the cost equation for van operating costs.

c. Use your results to predict costs at a volume of 15,000 miles.

d. Use Excel to determine the cost equation.

e. Determine the R-square for the excel cost equation. What does the R-square say about this equation?

f. Predict the costs again at 15,000 miles

g. Compare the two cost equations you generated.

h. How might you find the amount of a reasonable flat fee to charge instead?

Answer 1

HI, my dear friend i have ansered for A, B, C, AND D of your questions could you please explain the further questions clearly so that i can give my best thank you

month variable cost 1. plotting the data van operating expenses($) miles driven 5460 15800 5748 17300 5056 5536 14600 4672 january february march april may june july 4935 5310 5830 16000 5120 17100 5472 15400 4928 5420 5020 14500 4640 5830 17300 highest lowest 4935 14500 2. calculation of cost equation using high and low method cost equation highest expense- lowest expense highest miles- lowest miles driven variable cost 895 0.3196428571 2800 fixed cost 409.64 (5460-(15800*0.32)) 5050.36 (5460-409.64) variable cost 3.predicting the cost at 15000 miles 0.32 variable cost per mile no of miles total variable cost is fixed cost remains same thus total cost( 4800+409.64) 15000 4800 (0.32*15000) 409.64 5209.64