Complete the following below:

1. ABC Airlines has calculated the total costs (fixed and variable) for the passenger service flights between Los Angeles, California and Orlando, Florida. The two methods used were the high-low method and the least squared method. Compare and contrast these two methods. Which one is the most reliable? What affect does an outlier have on the high-low method? Which method would you recommend to ABC?

2. List and discuss ten possible cost drivers for an aircraft manufacturing firm.

3. Complete questions #2 and 4 using the information below:

Jefferson County Airport handles several daily commuter flights and many private flights. The county budget officer has compiled the following data regarding airport costs and activity over the past year.

Month Airport Costs Flights Originating at Jefferson County Airport

January $20,000 1,200

February 19,000 1,000

March 18,000 900

April 19,000 1,400

May 17,000 800

June 20,000 1,100

July 21,000 1,500

August 17,000 900

September 21,0001,200

October 19,000 1,000

November 24,000 1,400

December 18,000 1,100

2. Construct an Excel spreadsheet and use the excel commands to perform a least-square regression. Estimate the variable and fixed-cost components in the airports cost behavior pattern.

4. Predict the airports costs during a month when 1,500 flights originate at the airport. The spreadsheet must accompany the submission.

Problem 06-46 1. Scatter diagram: Jefferson County Airport Month January February March April May June July August September October November December Airport Costs Flights * * * * * * * * * * * * * * * * * * * * * * * * 2. Least-squares regression: (a) Tabulation of data: Dependent Variable (cost in thousands) Y Month January February March April May June July August September October November December Independent Variable (flights in hundreds) X * * * * * * * * * * * * * Total * * * * * * * * * * * * * (b) Calculation of parameters: a= a= (Y) (X2) n (X2) * (X) (XY) (X) (X) b= n (XY) n (X2) - b= (X) (Y) (X) (X) * (c) Fixed- and variable-cost components: Monthly fixed cost = Variable cost = * * per hundred flights 3. Cost equation Total monthly airport cost = * + where X denotes the number of flights in hundreds. 4. Cost prediction for 1,600 Airport cost for the month = flights * 5. Calculation and interpretation of R2 Formula for calculation R2 =1- S(Y-Y1)2 S(Y-)2 Where Y denotes the observed value of the dependent variable (cost) at a particular activity level Y1 denotes the predicted value of the dependent variable (cost) based on the regression line, at a particular activity level denotes the mean (average) observation of the dependent variable (cost) Tabulation of data: Month January February March April May June July August September October November December Y 20 17 19 18 19 20 18 24 19 21 17 21 X 11 8 14 9 10 12 11 14 10 12 9 15 Total 233 135 Rounded Calculation of R2: Briefly interpret R2: * Student Name: Class: X2 XY * * * * * * * * * * * * * * * * * * * * * * * * * * * X the dependent the dependent gression line, bservation of the Predicted Cost (in thousands) Based on Regression Line Y' * * * * * * * * * * * * [(Y-Y')2] [(Y-)2] * * * * * * * * * * * * * * * * * * * * * * * * * *