Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis
Question:
Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. The following data were collected from last year's operations (revenues and costs in thousands of dollars).
StoreRevenuesCosts101$4,100$4,2141022,2272,8941035,7385,1811043,9823,9981052,9143,6761064,0233,3191076,8945,0291081,7792,3741095,4164,6881103,2282,9591113,8864,1791124,6903,2001133,5522,5561144,8174,6551152,1242,986
Simple regression results from the data of Davis Stores are as follows.
Equation:Store costs = $1,604.40 + (Revenue 53.6%)Statistical dataCorrelation coefficient0.835R20.698
Required:
a.Estimate store costs for a store with revenue of $2.5 million.
b.What percentage of the variation in store costs is explained by the independent variable?
Fundamentals of Cost Accounting
ISBN: 978-1259565403
5th edition
Authors: William Lanen, Shannon Anderson, Michael Maher