The management of Buff Sports Stadium believes that the number of sporting event
ID: 2469522 • Letter: T
Question
The management of Buff Sports Stadium believes that the number of sporting events each month is an measure of activity for total clean-up cost. Shown below are event figures and total clean up costs for the past four months:
Month Number of sporting events Total clean up cost
july 28 $30,900
august 34 $34,200
sept 16 $20,700
oct 22 $28,200
Required: a. Estimate Buff's cost formula for monthly clean-up cost using the high-low method.
b. Estimate Buff's cost formula for monthly clean-up cost using the least-squares regression method.
Explanation / Answer
Variable Cost per Unit =
Total Fixed Cost = y2 bx2 = y1 bx1
A High Low MethodVariable Cost per Unit =
y2 y1 x2 x1 Where, y2 is the total cost at highest level of activity; 34200 y1 is the total cost at lowest level of activity; 20700 x2 are the number of units/labor hours etc. at highest level of activity; and 34 x1 are the number of units/labor hours etc. at lowest level of activity 16 Variable Cost Per unit 750 Total Fixed Cost Total fixed cost (a) is calculated by subtracting total variable cost from total cost, thus:Total Fixed Cost = y2 bx2 = y1 bx1
8700 least-squares regression method. X Y X2 Y2 28 30900 784 954810000 34 34200 1156 1169640000 16 20700 256 428490000 22 28200 484 795240000 100 114000 2680 3348180000 Unit Variable Cost b=(nxy-xy)/(nx2-x2) 4920441.176 Total Fixed Cost a =(y-bx)/n -98386023.53Related Questions
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