Latif and Koehler Tax Services Company has 31 branch offices in the nation. Each office has about three to six professional accountants and one to two secretaries. In a busy season, the office manager, who is also a professional accountant, can hire temporary employees for support work such as document filing and typing. Josh Lane, the president, is wondering whether he should expand his business by opening more offices. One of the factors that he is considering is how to estimate office support costs. Vineeta Riley, the accountant, collected the following cost data for all 31 offices:

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Required

a. The company uses the number of professional hours as the cost driver for office support costs. Use an algebraic equation to describe how total office support costs can be estimated.

b. Use a spreadsheet program to perform a regression analysis. Use office support costs as the dependent variable (Y) and the professional hours as the independent variable (X). Determine the total fixed cost per office and variable cost per professional hour.

c. Identify the R² statistic provided by the Excel program and explain what it means.

d. Mr. Lane plans to open a new branch office in a Chicago suburb. He expects that the monthly professional hours will be 3,000. Estimate the total office support cost for Mr. Lane. What portion of the total cost is fixed and what portion is variable?

e. Explain how multiple regression analysis could be used to improve the accuracy of the cost estimates. 

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Professional Support Costs Professional Support Costs Branch Hours Branch Hours $4,241 3,435 A1 F2 $3,856 225 165 A2 G1 113 358 5,936 8,615 АЗ G2 387 6,398 471 A4 G3 412 6,502 4,140 492 9,639 5,968 B1 G4 258 328 B2 G5 359 146 3,368 3,820 6,396 7,115 3,287 7,515 ВЗ G6 275 174 D1 H1 364 394 D2 H2 190 3,946 8,189 4,506 6,744 4,645 386 7,374 5,376 5,784 5,426 4,418 D3 12 484 279 D4 251 15 314 D5 J2 283 377 E1 J3 264 198 E2 J4 4,506 6,488 169 6,073 6,290 226 ЕЗ J5 341 338 F1 437 9,113