CASE STUDY 1 60 MINUTES Jennifer, the financial manager at Palm Beach restaurant believe that advertising expenses has a good relationship with the revenue. Therefore she is intended to use the advertising expenses to estimate the sales revenues and the profit of the restaurant. She obtains the following data for the past 9 months Month Revenues Advertising expenses $52 000 April $120 000 May 270 000 65 000 June 320 000 80 000 480 000 90 000 430 000 100 000 July August September October 450 000 110 000 540 000 120 000 November 670 000 180 000 December 780 000 195 000 She estimates the following regression equation: Monthly revenues = $15 825 + ($3.95 x Advertising expenses) revenues Required: 1. Use the high-low method to calculate the function relating advertising costs and (30 MARKS) 2. If Jennifer add advertising expenses $10 000, calculate the additional profit is expected by assuming that other expenses (consider variable costs) is 50% from revenue using: a) the regression equation (20 MARKS) b) the high-low equation (20 MARKS) 3. Which method should Jennifer use to predict the effect of advertising costs on revenues? Explain briefly (30 MARKS)