Odessa, Inc., manufactures one model of computer desk. The following data are av

Question

Odessa, Inc., manufactures one model of computer desk. The following data are available regarding units shipped and total shipping costs Number of Units Shipped 60 25 65 50 70 40 75 Total Shipping Month January February March April May June July Cost S3,850 2.300 3,600 3,200 3,650 2,500 3,650 Required 3. Using the high-low method, calculate Odessa's total fixed shipping costs and variable shipping cost per unit. (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar) Fixed Cost Variable Cost per Unit 4. Perform a least-squares regression analysis on Odessa's data. (Use Microsoft Excel or a statistical package to find the coefficients using least-squares regression Round your answers to 2 decimal places.) Coefficients Intercept X Variable 5. Using the regression output, create a linear equation ( a bx) for estimating Odessa's shipping costs Total Shipping Cost- Number of Units Shipped

Explanation / Answer

3. High low method:

Variable cost per unit = (y2-y1)/(x2-x1)

y2 = 3650, y1 = 2300, x2 = 75 and x1 = 25

Thus variable cost per unit = (3650-2300)/(75-25)

= 1350/50

= $27

Fixed cost = y2 - 27*(x2) = 3650 - (27*75) = $1,625

4. Using excel the following result is obtained:

Thus x variable = [n*(sum of x*y) - (sum of x*sum of y)]/[7*(sum of x^2) - (sum of x)^2]

= [(7*1311750) - (385*22750)]/[(7*23075) - (385^2)]

= 31.84211

Intercept = (sum of y - 31.84211*sum of x)/7

= (22750-31.84211*385)/7

= 1498.68

5. Total shipping cost = 1498.68+31.84*no. of units shipped

Fixed cost 1625 Variable cost per unit 27

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