Requirement 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? Data table Data table Month Cost of Purchase Purchase Quantity Month Expected October 3,340 parts January February $ 12,675 Quantity Purchased 2,710 parts 13,000 2,810 March 17,653 4,153 November 3,710 April 15,825 3,756 December 3,040 May 13,125 2,912 June 13,814 3,387 July 15,300 3,622 Print Done August 10,233 2,298 September 14,950 3,562 Print Done Requirements 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.
Requirement 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? Data table Data table Month Cost of Purchase Purchase Quantity Month Expected October 3,340 parts January February $ 12,675 Quantity Purchased 2,710 parts 13,000 2,810 March 17,653 4,153 November 3,710 April 15,825 3,756 December 3,040 May 13,125 2,912 June 13,814 3,387 July 15,300 3,622 Print Done August 10,233 2,298 September 14,950 3,562 Print Done Requirements 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.
Chapter3: Setting Up A New Company
Section: Chapter Questions
Problem 3.4C
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Transcribed Image Text:Requirement 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?
Data table
Data table
Month
Cost of Purchase
Purchase Quantity
Month
Expected
October
3,340 parts
January
February
$
12,675
Quantity Purchased
2,710 parts
13,000
2,810
March
17,653
4,153
November
3,710
April
15,825
3,756
December
3,040
May
13,125
2,912
June
13,814
3,387
July
15,300
3,622
Print
Done
August
10,233
2,298
September
14,950
3,562
Print
Done
Requirements
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.
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