ABC, Inc., sells tea products to various customers. In recent years, profits have been declining. The CFO of the company investigated the reasons for the profit decline and performed a regression analysis for sales and costs. She determined that sales depend on product price, delivery speed, customer services, and marketing expenses. She also determined that total costs consist of variable costs of $25 per unit and fixed costs of $56,000. Marketing expenses have a coefficient of determination of 75% related sales.

Questions:

1. Define regression analysis, simple regression, and multiple regression. Identify one example of each in this scenario. 2. Express the relationship between total costs and variable costs for ABC, Inc., using a regression equation. Explain each element of the equation. 3. If ABC, Inc. produces 50,000 units of output, what is the total cost? 4. Define the coefficient of determination and explain what it means in this scenario. 5. List two advantages and two limitations of regression analysis.