Question
Assessment 2 Part 1: Interpretation of Regression Results Part 1 Scenario Your company provides various delivery services. Management wants to know the volume of a
Assessment 2 Part 1: Interpretation of Regression Results
Part 1 Scenario
- Your company provides various delivery services. Management wants to know the volume of a particular delivery that would generate $11,000 per month in operating profits before taxes. The company charges $22 per delivery.
- The controllers office has estimated overhead costs at $9,900 per month for fixed costs and $12 per delivery for variable costs. You believe that the company should use regression analysis. Your analysis shows the results to be:
- Monthly overhead=$26,501+$10.70 per delivery.
Your estimate was based on the following data:
Month | Overhead Costs | Number of Deliveries |
---|---|---|
1 | $159,630 | $12,510 |
2 | $183,990 | $15,060 |
3 | $142,860 | $11,430 |
4 | $194,430 | $15,450 |
5 | $151,890 | $12,180 |
6 | $150,120 | $11,970 |
7 | $192,600 | $15,660 |
8 | $154,080 | $12,630 |
9 | $141,030 | $11,250 |
10 | $184,800 | $15,300 |
11 | $203,490 | $12,780 |
12 | $183,120 | $14,580 |
13 | $180,630 | $14,730 |
Complete the following:
The company controller is somewhat surprised that your cost estimates differ so greatly from the controller's estimates. You have been asked to recheck your work and see if you can figure out why.
- Analyze the data and your results and state your reasons for supporting or rejecting your cost equation. Show all calculations.
- Write a one-page report informing management of the correct volume that will generate $11,000 per month in operating profits before taxes. The report should include an introduction, operating cost summary, proposed volume to generate desired operating profits before taxes, and a conclusion.
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