Question

Gator Beach Marts, a chain of convenience grocery stores in the Fort Lauderdale area, has store hours that fluctuate from month to month as the tourist trade in the community varies. The utility costs for one of the company’s stores are listed below for the past six months.

Gator Beach Marts, a chain of convenience grocery stores in the Fort Lauderdale area, has store hours that fluctuate from month to month as the tourist trade in the community varies. The utility costs for one of the company's stores are listed below for the past six months. Total Hours Month of Operation January 400 February 600 March 800 April 350 May 300 June 250 Total Utility Cost $2,620 3,400 4,200 2,500 2,150 2,000 Required: 1-a. Use the high-low method to estimate the cost behavior for the store's utility costs. Express the cost behavior in formula form (Y= a + bx). 1-b. What is the variable utility cost per hour of operation? 3-a. Construct an Excel spreadsheet and use the Excel commands to perform a least-squares regression. Estimate the cost behavior for the store's utility cost. Express the cost behavior in formula form. 3-b. What is the variable utility cost per hour of operation? 4. During July, the store will be open 300 hours. Predict the store's total utility cost for July using each of the cost- estimation methods employed in requirements (1) and (3). Complete this question by entering your answers in the tabs below.

Answer 1

Please find the attached solution.

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the High-low method is as follows: High-low Method formula = The formula for Developing a cost Model using Varjable Gost = Highest unit Activity cost Highest Activity Units - howest Activity Cost Lowest Activity Units fixed cost frighest Actoring - Cover Variable x Highest cost (P. Activity Units I Now, variable: Cost az / +4200–2000) (per unit) 800 250 units 1 $.4 persent fixed Cost $ 42003734x 800 D Te $1000 # Estimated tastal Utility cost for Julys Estimated Hours operated for aty 300 Houst CS Scanned with CamScanner

& cost Model $1000+ $4X Te Ecuation of Activity Level) frized cast +Variable y tonite Gost! Activity) (#1000 + (+4_x300 Hourt) $2200. a le Loe July estimated Utility cost THANK Youll Least souare Methods y = atba reRegeration time) 6→ nexy - EXCEU) ntExz)=(Ex)2 a => €4xEX --CE) CEVY) NEXZ (EX) ² OR Ey- bEx n CS Scanned with CamScanner

y: total cost A: Total fixed cast. be variable cost for levd of Activity. Xi Level _Activity I Variable cost Per level 4 Activity (5 60x38468000) -(29700 (16870) (6x1435000) - (2700)? b=3.984 b fixed cost 19) (16870x1435000) -(8700)78468000) (6x1435000) – (2700)? a= $ 1018.825 Regeration Line > Zy= a +bx te y = $1018-825 +3.9898 Total Estimated cost for July Month for $1018.825+ 3-984 x(300) 3oo tours Cafecity B 2014-025 CS Scanned with CamScanner

Subject Hours Hours Vtility Month) (in $) ху. x? operations Cin 100) (no) Chico) 142 ܗܐ January yoo Howy $262.0 1048. 1600 68644 February 600 3400 2040 3600|115600 March gom 4200 3360 6400 176400 April 350 2500 875 12251 62500 May 300 2150 645 900 46225 June 250 2000 500 645 400V EX 2700 Ey Exy Ex² Ey2 16870 1 846800011435000 W $50931900 I High-Low Method cost Model, ya 1000 x 2 프 Variable Cast under High-low Method - [14 Portour. 2. Cest Behaviour_under Leest souare. Regesaction? ya $10/8.825 +3.9247 Variable utility cast s $3-984 ker to un Onder Leest salon. CS Scanned with CamScanner

Estimated July Utility Costi Under High-low Melhed! $2200 Under least square Method: &2214.025 THANK YOU! CS Scanned with CamScanner