Hello, I need help with interpreting the data from the table below. The main que
ID: 3271904 • Letter: H
Question
Hello, I need help with interpreting the data from the table below. The main question is what problems do you see with the Fixed Cost and Variablr Cost data? The explanantion should be with regard to high-low and regression method. I am not sure but is it normal to have VC with negative amount? Thank you very much!
Column
Expense
FC
VC
R-sq
1
Salaries
$106,866
-$ 110
4.10%
2
Vacation
$ 1,194
S 1.42
0.20%
3
Advertising and Training
$ 24,348
-$0.02
0%
4
Supply/Tools/Laundry
$ 8,269
-$22.27
9.30%
5
Freight
$ 430.34
$ 0.32
0.20%
6
Vehicles
$ 1,809
$ 0.18
0.00%
7
Demonstrators
$ 1,305.00
-$6.76
3.90%
8
Floor Planning
$ 80,537
-$399.63
28.30%
Computed Total
$224,758
-$537
9
Total
$224,758
-$537
24.70%
Column
Expense
FC
VC
R-sq
1
Salaries
$106,866
-$ 110
4.10%
2
Vacation
$ 1,194
S 1.42
0.20%
3
Advertising and Training
$ 24,348
-$0.02
0%
4
Supply/Tools/Laundry
$ 8,269
-$22.27
9.30%
5
Freight
$ 430.34
$ 0.32
0.20%
6
Vehicles
$ 1,809
$ 0.18
0.00%
7
Demonstrators
$ 1,305.00
-$6.76
3.90%
8
Floor Planning
$ 80,537
-$399.63
28.30%
Computed Total
$224,758
-$537
9
Total
$224,758
-$537
24.70%
Explanation / Answer
The enite background information of the question is not provided
However , please note that FC+VC = Total Cost
Now , Fixed cost is the cost that is incurred by the process and does not change when we change the number of units produced. Variable cost on the other hand are the function of the number of units produced. Hence they are usually calculated as cost per unit*number of units , given that the number of units can be zero , VC can atmost be zero and cant be negative .
Also , the r square value tells us how much of variation is actually being captured by the model . so if the value of r square is 4.2% , this means that the regression model is able to explain only 4.2% variation of the data , which is not at all good
I suppose what we are looking at is a regression equation
Expense = 106866 - 110*VC , for salaries , so this means that for every unit change in VC , the expense goes down by 110 units
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