A building materials supply companys material-handling department has studied its cost for the past year and has determined the following:

Month	Activity Level (pallets of material)		Material Handling Department Costs
January	3,600	$11,700
February	3,200	11,300
March	2,600	11,250
April	2,000	11,220
May	4,400	11,100
June	4,800	12,550
July	4,000	12,000
August	3,600	11,400
September	5,200	13,332
October	2,200	10,038
November	2,400	11,362
December	2,800	11,350

Required: Show all work. (0.5 point each; total 4 points)

Estimate the material-handling department's cost behavior using the high-low method.

Provide an equation to express the results of this estimation method.

Construct an Excel spreadsheet to perform a least-squares regression to estimate the material handling departments cost behavior. Attach the spreadsheet to the examination file.

Provide an equation to express the results of this estimation method.

Predict the departments material-handling costs for a month when 2,250 units of activity are recorded. Use each of your cost equations to make the prediction.

a) High Low b) Regression

Which prediction would you prefer to use and why?

Use your Excel spreadsheet from requirement (3) to compute the R2value for the regression.

Interpret the R2 value that is, what does R2 mean?