Analyzing Mixed Costs Using Scattergraph, High-Low, and Least Squares Regression MethodsLa...

Analyzing Mixed Costs Using Scattergraph, High-Low, and Least Squares Regression Methods

Larry’s Sporting Goods is a locally owned store that specializes in printing team jerseys. The majority of its business comes from orders for various local teams and organizations. While Larry’s prints everything from bowling team jerseys to fraternity/sorority apparel to special event shirts, summer league baseball and softball team jerseys are the company’s biggest source of revenue. A portion of Larry’s operating information for the company’s last year follows:

Required:

1. Prepare a scattergraph of Larry’s operating cost and draw the line you believe best fits the data. Identify any potential outliers and explain your treatment of them.

2. Based on this graph, estimate Larry’s total fixed costs per month.

3. Using the high-low method, calculate the store’s total fixed operating costs and variable operating cost per uniform.

4. Using the high-low method results, calculate the store’s expected operating cost if it printed 480 jerseys.

5. Perform a least-squares regression analysis on Larry’s data.

6. Using the regression output, create a linear equation (Y = A + BX) for estimating Larry’s operating costs.

7. Using the least-squares regression results, calculate the store’s expected operating cost if it prints 625 jerseys.