Question

Below is the data from a regression analysis performed by Earth Right Spa on its overhead costs and clients for the past year. Use this information to answer the following questions.

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.949
R Square	0.901
Adjusted R Square	0.891
Standard Error	1102.512
Observations	12.000

		ANOVA
	df	ss	MS	f	Significance F
Regression	1	111011767.37	111011767.37	91.33	0.00
Residual	10	12155332.63	1215533.26
Total	11	123167100.00

	Ceofficients	Standard Error	tStar	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95%
Intercept	6825.84	724.43	9.42	0.00	5211.70	8439.98	5211.70	8439.98
Guests (X)	32.86	3.44	9.56	0.00	25.20	40.52	25.20	40.52

Knowledge Check 01

Identify the fixed overhead cost per month from the data provided.

• $8,364.72

• $946.56

• $6,825.84

• $6,546.54

Knowledge Check 02

What is the variable overhead cost per client served?

• $724.43

• $25.20

• $40.52

• $32.86

Knowledge Check 03

What will be the total overhead cost if 100 clients are served?

• $10,111.84

• $79,269.07

• $9,345.86

• $10,878.24

The span at which the cost behaviors are expected to hold true is called:

Answer 1

The intercept here represents the fixed cost, i.e. 6825.84

The slope or X represents the cost per client serves i.e. 32.86

The total overhead for serving 100 clients is = (6825.84+(100*32.86))=10111.84

Span at which the cost behaviors are expected to hold true is called Confidence interval