Question
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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