6. Kate Chen, owner of Flower Mode, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Chen wants to set the delivery fee based on the distance driven to deliver the flowers. Chen wants to separate the fixed and variable portions of her van operating costs so that she has a better idea how delivery distance affects these costs. Flower Mode does a regression analysis on the next year's data using Excel. The output generated by Excel is as follows: 1(Click the icon to view the regression analysis.) Read the requirements Requirement 1. Determine the firm's cost equation (use the output from the Excel regression). (Enter amounts to two decimal places.) y = X + Requirement 2. Determine the R-squared (use the output from the Excel regression). The R-squared is (1) What does Flower Mode's R-squared indicate? Flower Mode (4) feel confident using this cost The R-squared indicates that the cost equation explains (2) of the variability in the data. In other words, it (3) equation to predict total costs at other volumes within the same relevant range. Requirement 3. Predict van operating costs at a volume of 15,000 miles assuming the company would use the cost equation from the Excel regression regardless of its R-squared. Should the company rely on this cost estimate? Why or why not? (Round your answer to the nearest cent.) The operating costs at a volume of 15,000 miles is Should the company rely on this cost estimate? Why or why not? Since the R-squared is (5). the company (6) 1: Regression analysis A B D E G 1 SUMMARY OUTPUT Regression Statistics w N 3 Multiple R 0.86 4 R Square 0.75 5 Adjusted R Square 0.7 6 Standard Error 171.55 7 Observations 7 8 ANOVA 9 df SS MS F Significance F 10 Regression 1 435,336.22 435,336.22 14.79 0.0120 11 Residual 5 147,149.49 29,429.90 12 Total 6 582,485.71 13 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% 14 Intercept 709.81 1,150.73 0.62 0.56 -2,248.24 3,667.85 15 X Variable 1 0.29 0.07 3.85 0.01 0.09 0.48 2: Requirements 1. Determine the firm's cost equation (use the output from the Excel regression). 2. Determine the R-squared (use the output from the Excel regression). What does Flower Mode's R-squared indicate? 3. Predict van operating costs at a volume of 15,000 miles assuming the company would use the cost equation from the Excel regression regardless of its R-squared. Should the company rely on this cost estimate? Why or why not? (1) O 0.07 (2) O 7% (3 (4) will not (5) 0.70 O 0.56 0.75 O 0.86 OOOO 86% 75% 56% 70% fits the data quite well. does not fit the data at all. should be used with caution. OOO should may or may not between .50 and .80 less than .50 over .80 (6) O should use the cost equation with caution. should not rely on this cost estimate. can rely on this cost estimate