Required:
1 Which month represents the high point? And which month is the low point? (1 mark).
2 Using the high-low method;
i. Compute the variable rate for tanning. (1 mark).
ii. Compute the fixed cost per month. (1 mark).
3 Using your answers to Requirement 2, write the cost formula for spray-tanning services. (1 mark). Calculate the total predicted cost of spray-tanning services for September for 2 500 appointments. How much is the total fixed cost for September? How much is the total predicted variable cost for September? (4 Marks)
4 Prepare and explain a scatter graph based on Jenny’s data. Use cost for the vertical axis and number of spray- tanning appointments for the horizontal. Based on an examination of the scatter graph, does there appear to be a linear relationship between the cost of spray-tanning services and the number of appointments? (3 marks)
5 Using an Excel® spreadsheet, run a regression on these data. Based on the regression output, write the cost formula for spray-tanning. (3 marks) (Note: Round the fixed cost to the nearest dollar and the variable rate to the nearest cent.)
6 Using the formula computed in Requirement 6, what is the predicted cost of spray-tanning services for September for 2 500 appointments? (1 marks)

Question 1: Cost estimation - Regression (14 Marks) Jenny Chan has been operating a beauty shop in a North Parramatta for the past 10 years. Recently, Jenny rented space next to her shop and opened a spray-tanning salon. She anticipated that the costs for the spray- tanning service would primarily be fixed but found that spray-tanning salon costs increased with the number of appointments. Costs for this service over the past eight months are as follows: Month January | February March | April May June | July August Spray-Tanning Appointments 1 600 2000 | 3 500 2 500 | 1 500 2 300 2 150 | 3.000 Total Costs (S) 1 754 2 140 2 790 2 400 1 790 2 275 2 200 2 640 Jenny recently attended a meeting of the local chamber of commerce and heard a business consultant discuss regression analysis and its business applications.