Question

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Kristen Chen owner of Flower Paradise​, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery​ fee, Chen wants to set the delivery fee based on the distance driven to deliver the flowers. Chen wants to separate the fixed and variable portions of her van operating costs so that she has a better idea how delivery distance affects these costs. She has the following data from the past seven​ months:

1Data Table Month Miles Driven 16,500 18,500 16,100 17,100 17,500 15,800 15,500 Van Operating Costs $5,260 $5,730 $4,960 $5,420 $5,790 $5,300 $5,040 January... March April .. June . Print Done

Requirement 1: Determine the​ company's cost equation​ (use the output from the Excel​ regression).

y= $ ___ x + $ ____

Requirement 2: Determine the R-square (use the output from the excel regression)

The R-square is ____

What does Flower Paradise's R-square indicate?

The R-square indicates that the cost equation explains ____% of the variability in the data. In other words, if ________ Flower Paradise's _____(should/should not) feel confident using this cost equation to predict total costs at other volumes within the same relevant range.

Requirement 3: Predict van operating costs at a volume of 14,500 miles

Should the company rely on this cost estimate? why or why not?

Answer 1

The R-square indicates that the cost equation explains 74.6% of the variability in the data. In other words, if 74% Flower Paradise's should feel confident using this cost equation to predict total costs at other volumes within the same relevant range. Requirement 3: S0.2590x+ S1028.2785 0.2590 (14500) +1028-2785 = 3755.5 +1028-2785 = $4783.7785 Yes, the company rely on this cost estimate. Because there is a significant relation ship between miles driven and van operating costs