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Dr. Fred Myer has been appointed the chairperson of the Marketing Department at his university. In reviewing the department's cost records, Dr. Myer has found
Dr. Fred Myer has been appointed the chairperson of the Marketing Department at his university. In reviewing the department's cost records, Dr. Myer has found the following total cost associated with Marketing 101 over the last five terms: Number of Sections Offered 4 6 Term Fall, last year Winter, last year Summer, last year Fall, this year Winter, this year Total Cost $10,000 $14,000 $7,000 $13,000 $9,500 2 5 3 Dr. Myer knows that there are some variable costs, such as amounts paid to graduate assistants, associated with this course. He would like to have the variable and fixed costs separated for planning purposes. Required: 1. Using the high low method, express the variable and fixed cost estimates in the linear equation format (Y = a + bx). (15 points) 2. Based on the above linear equation created, what would Dr. Myer predict total costs to be if in the fall of next year, 7 sections of Marketing 101 were offered? (5 points) 3. Using the least squares regression method in Excel, what is the linear equation Dr. Myer would use to predict future costs? (15 points) 4. Based on the linear equation provided with the least squares regression method, what would be the estimated total cost of Marketing 101 in the spring of next year if 4 sections of the course were offered? (5 points) 5. Based on the least squares regression method, what does the R-square mean? Does the R-square indicate a good correlation or bad correlation between the total cost and sections offered? Would you suggest investigating a new activity upon which total cost if driven? (5 points) 6. Which method is more accurate and why? (5 points)
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