Linda joined Galway Company, a toy manufacturer, one month ago and has not learned much about cost accounting. In spite of lacking for experience in this area, her boss Ron has urged her to start a budgeting project due to a shortage of staff in house. Ron wants to know how much total delivery costs would be incurred next month with an expectation of $2,000$ toys sold and delivered, an unprecedented number in Galway$$s history, but still within its relevant range. Ron has not told Linda much information and what to do about this project but has only given the following numbers related to the delivery units and costs incurred in the past $12$ months. Linda asks you to help her complete the assigned work. $($Watch my videos posted on Blackboard Module $5$ folder.$)$

Month Units delivered Delivery cost Month Units delivered Delivery cost

$1800$ $$20,00071,250$ $$26,000$

$21,00021,00081,40030,000$

$390019,50091,30024,000$

$41,20022,500101,50033,500$

$51,40029,500111,70036,000$

$61,10021,500121,60034,000$

Instructions:

$1.$ Based on the above data, use the method of least squares $($i$.$e$.,$ regression$)$ in Excel to get the output tables.

$2.$ Based on the Excel output tables, form an equation for the expected delivery cost.

$3.$ Based on your equation, determine the expected delivery cost with $2,000$ units delivered.

$4.$ Assume that the delivery cost in Month $4$ in the above table is $$40,000$ instead of $$22,500,$ and everything else is the same. The significantly high cost of $$40,000$ in Month $4$ was unusual and was caused by an incident that is not expected to recur in the future. Complete the following:

A$.$ Redevelop the regression equation using this new Month $4$ as well as other $11$ Months and determine the expected delivery costs with $2,000$ units delivered.

B$.$ Redevelop the regression equation by excluding Month $4($i$.$e$.,$ using other $11$ Months$)$ and determine the expected delivery costs with $2,000$ units delivered.

C$.$ Discuss the differences on your results between $4.$A$.$ and $4.$B$.$ With the cost of $$40,000$ in Month $4,$ which equation is more appropriate to determine expected delivery cost?