Question list

Molly Stone is the new manager of the materials storeroom for Parr Manufacturing. Molly has been asked to estimate future monthly purchase costs for part #$696,$ used in two of Parr's

products. Molly has purchase cost and quantity data for the past $9$ months as follows:

$($Click the icon to view the data for the past $9$ months.$)$

Estimated monthly purchases for this part based on expected demand of the two products for the rest of the year are as follows:

$($Click the icon to view the expected demand for the rest of the year.$)$

Read the requirements.

Requirement $1.$ The computer in Molly's office is down, and Molly has been asked to immediately provide an equation to estimate the future purchase cost for part #$696.$ Molly grabs a

calculator and uses the high$-$low method to estimate a cost equation. What equation does she get?

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Data table

Requirements

The computer in Molly's office is down, and Molly has been asked to

immediately provide an equation to estimate the future purchase cost for

part #$696.$ Molly grabs a calculator and uses the high$-$low method to estimate

a cost equation. What equation does she get?

Using the equation from requirement $1,$ calculate the future expected

purchase costs for each of the last $3$ months of the year.

After a few hours Molly's computer is fixed. Molly uses the first $9$ months of

data and regression analysis to estimate the relationship between the quantity

purchased and purchase costs of part #$696.$ The regression line Molly obtains

is as follows:

$y=$$$2,076\mathrm{.}9+3\mathrm{.}68x$

Evaluate the regression line using the criteria of economic plausibility,

goodness of fit, and significance of the independent variable. Compare the

regression equation to the equation based on the high$-$low method. Which is a

better fit? Why?

Use the regression results to calculate the expected purchase costs

for October, November, and December. Compare the expected purchase

costs to the expected purchase costs calculated using the high$-$low method in

requirement $2.$ Comment on your results.