Multiple regression. The managers of Peterson\'s Catering Company are analyzing
ID: 411558 • Letter: M
Question
Multiple regression. The managers of Peterson's Catering Company are analyzing the costs involved in providing catering services. Managers have selected the following cost drivers: units of meals produced, total deliveries, number of VIP services, number of new customers, and new products developed. Here are the cost data and levels of cost driver activity for the past 16 months. 3 Month Total Overhead Meals Deliveries VIP New New Produced Services Customers Products 69,094.00 12,690.00 1,340.00$345.00 64,927.00 11,980.00 1,180.00$310.00 60,332.00 10,950.00 1,050.00$280.00 57,953.00$10,280.00 930.00 245.00 55,984.00$9,020.00840.00 $205.00 53,119.008,130.00 780.00 185.00 52,706.00$7,540.00 700.00160.00 630.00 144.00 53,445.008,930.00 680.00135.00 54,869.009,800.00$ 760.00 120.00 59,985.00$10,560.00 890.00 75.00 61,121.00 11,560.00 1,070.00$200.00 63,926.00 11,710.00 1,240.00$240.00 66,602.00 12,460.00 1,390.00$285.00 72,773.00 13,520.00 1,450.00$330.00 71,391.00 13,620.00 1,510.00$315.00 972,101.00 169,730.00 16,440.00$3,674.00 10 53,874.00 6,980.00 6 2 $ 1 10 10 14 16 Totals 103 17Explanation / Answer
a) The regression equation can be written as :
Costs = $12,414 + $2.34 Meals + $9.36 Deliveries + $32.91 VIP Services + $831.18 New Customers + $932.51 New Products
Therefore, the cost driver rates are:
Meals ........................................................... $2.34 per Meal
Deliveries .................................................... $9.36 per Delivery
VIP Services .............................................. $32.91 per VIP Service
New Customers................................. ........ $831.18 per New Customer
New Products............................................. $932.51 per New Product
B) The estimated costs of doing business at the following cost driver volumes are computed using the cost driver rates computed above.
Activity Level X Rate = Cost
Meals Produced - 12,000 X $ 2.34 = $28,080
Deliveries - 1,100 X $ 9.36 = $10,296
VIP Services - 300 X $ 32.91 = $9,873
New Customers - 5 X $ 831.18 = $4,156
New Products - 2 X $ 932.51 = $1,865
Intercept = $12,414
Total Estimated Costs for the budget = $66,684
c) The company would save $10,296 per month by outsourcing the delivery service.
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