Clavton's
products.
May
has
purchase
cost
and
quantity
data
tor
the
past
Y
montns
as
rollows:
Estimated
monthly
purchases
for
this
part
based
on
expected
demand
of
the
two
products
for
the
rest
of
the
vear
are
as
follows:
Month
Cost
of
Purchase
(O
TET
L
AT
R
January
$12,675
2,710
parts
February
13,000
2,810
‘March
17,653
4,153
April
15,825
3,756
May
13,125
2,912
June
13,814
3,387
July
.
15300
3622
August
10,233
2,298
_September
|
14,950
o
3,562
.
Month
Purchase
Quantity
Expected
October
|
3,340
parts
‘November
|
3,710
_December
1
3040
Required
1.
The
computer
in
May’s
office
is
down,
and
May
has
been
asked
to
immediately
provide
an
equation
to
estimate
the
future
purchase
cost
for
part
#696.
May
grabs
a
calculator
and
uses
the
high-low
method
to
estimate
a
cost
equation.
What
equation
does
she
get?
2.
Using
the
equation
from
requirement
1,
calculate
the
future
expected purchase
costs
for
each
of
the
last
3
months
of
the
year.
3.
After
a
few
hours
May’s
computer
is
fixed.
May
uses
the
first
9
months
of
data
and
regression
analysis
to
estimate
the
relationship
between
the
quantity
purchased
and
purchase
costs
of
part
#696. The
regression
line
May
obtains
is
as
follows:
y=$2,582.6+$3.54X
Evaluate
the
regression
line
using
the
criteria
of
economic
plausibility,
goodness
of
fit,
and
significance
of
the
independent
variable.
Compare
the
regression
equation
to
the
equation
based
on
the
high-low
method.
Which
is
a
better
fit?
Why?
4.
Use
the
regression
results
to
calculate
the
expected purchase
costs
for
October,
November,
and
December.
Compare
the
expected
purchase
costs
to
the
expected
purchase
costs
calculated
using
the
high-low
method
in
requirement
2.
Comment
on
your
results.
