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1.
Compute the cost of painting 3,300 square foot house with 14 external openings and 2,400 square foot house with 8 external openings.
1.
Explanation of Solution
Analysis based on square feet:
High point is Home 5 and low point is home 1.
Compute cost equation using square feet as the cost driver.
Variable cost:
Fixed cost:
Total cost is predicted for 3,300 square foot house with 14 openings using equation for square feet.
Calculate total cost.
Total cost is predicted for 2,400 square foot house with 8 openings:
Compute total cost.
2.
Compute the cost of painting 3,300 square foot house with independent variable and 2,400 square foot house with independent variable.
2.
Explanation of Solution
Analysis is based on external openings as the cost driver.
Compute cost equation using square feet as the cost driver.
Compute cost equation using square feet as the cost driver.
Compute total earnings for total cost.
Total cost is predicted for 3,300 square foot house with 14 external openings:
Using equation there should be no prediction until 8 external openings are outside the relevant rage, high-low equations were developed in the range.
3.
Identify the variable that is a better cost driver and give reason.
3.
Explanation of Solution
The graph shown below is the relationship between costs and square feet which is linear and has no significantly outlying points. The same circumstance exists between costs and number of openings. On the whole the home 8 equation is better suitable for the data than the home 9 equation that is removed from the data. As per this view point both variable are good cost drivers.
Figure (1)
Figure (2)
4.
State the opinion on the statistical reliability and precision of this model.
4.
Explanation of Solution
The t-value and related p-value for independent variable, square feet, are important with p which is less than 0.05. The independent variable, opening is not important with a p-value of 0.3446. Using R-squared of 93% the overall regression is strong and the standard error of the estimate at 171 which is small percentage of the mean of $3,418 the dependent variable.
Summary output:
| Regression Statistics | |
| Multiple R | 0.96439 |
| R square | 0.930048 |
| Adjusted R square | 0.914503 |
| Standard error | 171.1824 |
| Observation | 12 |
Table (1)
| ANOVA | |||||
| Particulars | df | SS | MS | F | Significance F |
| Regression | 2 | 3506442 | 1753221 | 59.8299 | 6.33284E-06 |
| Residual | 9 | 263730.8 | 29303.42 | ||
| Total | 11 | 3770173 | |||
Table (2)
| Particulars | Coefficients | Standard error | t-star | P-value | Lower 95% |
| Intercept | 641.7603 | 270.0336 | 2.376594 | 0.041458 | 30.90182229 |
| X Variable 1 | 0.706915 | 0.200038 | 3.533911 | 0.006375 | 0.254398405 |
| X Variable 2 | 48.34898 | 48.47343 | 0.997433 | 0.344614 | -61.30553286 |
Table (3)
5.
Identify the sustainability issues for this company and list the role of cost estimation in the regard.
5.
Explanation of Solution
There exists a high probability that MC Company may face multiple sustainability issues in future. Since the company activities involve renovation of older homes, they mostly deal with materials that are hazardous in nature. This may include asbestos that may be used decades ago in sliding and other construction materials.
The present construction codes mandate proper treatment of hazardous materials during renovation process. This implies hazardous materials are treated with special care and even if they are expensive.
The treatment and disposal of materials must be performed by adhering to the regulations mentioned under the local, state, and federal authority.
The sustainability issues tend to create delay in the operations of a project due to additional activities to treat the materials during renovation process.
Ensuring the safety and comfort of the homeowners is a primary concern since handling such toxic materials and environmental protection is a prime concern.
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Chapter 8 Solutions
COST MANAGEMENT (W/CONNECT ACCESS)(LOOS
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