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Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and

Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. During a discussion, one of the managers suggests that number of employees might be better at explaining cost than store revenues. As a result of that suggestion, managers collected the following information from last years operations (revenues and costs in thousands of dollars):

Store Costs Employees Revenues
101 $5,727 52 $4,866
102 2,252 29 6,436
103 2,628 45 2,448
104 1,815 26 4,870
105 3,413 36 6,087
106 3,695 53 5,331
107 5,591 57 3,218
108 3,376 51 3,544
109 4,856 45 3,675
110 5,273 52 3,464
111 2,653 43 3,098
112 2,976 38 2,562
113 5,446 53 3,507
114 4,772 31 4,588
115 1,715 25 3,768

Required

a. Use the high-low method to estimate the fixed and variable portions of store costs based on employees. (Do not round your intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Enter your answers in thousands of dollars.)

b. Use the results of your high-low analysis to estimate the cost for a store with 51 employees. (Do not round your intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answer to the nearest whole number (in thousands of dollars).)

c. Prepare a scattergraph between store cost and employees.

Instructions:

1. Click on a point to the right of the graph. 2. Click within the graph to place the point. 3. To enter exact coordinates, click on the point and then click on the processing wheel symbol and then enter the exact coordinates in the dialog box that pops up. 4. Click OK.

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