Selecting a Basis for Predicting Shipping Expenses (Requires Computer Spreadsheet*)

Boom Company assembles and sellsportable speaker systems in the midwest. In an effort to improve the planning and control of shipping expenses, management is trying to determine which of three variablesunits shipped, weight shipped, or sales value of units shippedhas the closest relationship with shipping expenses. The following information is available:

Month Units Shipped Weight Shipped (lbs.) Sales Value of Units Shipped Shipping Expenses

May 6,000 9,300 $200,000 $8,960

June 10,000 12,000 220,000 12,320

July 8,000 12,150 160,000 10,400

August 14,000 15,000 228,000 16,640

September 12,000 10,500 280,000 13,760

October 9,000 12,000 320,000 13,120

Required

a. With the aid of a spreadsheet program, determine whether units shipped, weight shipped, or sales value of units shipped has the closest relationship with shipping expenses. Complete the r-squared values between each possible independent variable and shipping expenses:

Roundanswers totwo decimal places.

Units shipped .92

Weight shipped .59

Sale value .23

Based on the coefficient of determination,units shippedhas the closest relationship with shipping expenses.

b. Using the independent variable that appears to have the closest relationship to shipping expenses, develop a cost-estimating equation for total monthly shipping expenses.

Round answers totwo decimal places.

.9X

c. Use the equation developed in requirement (b) to predict total shipping expenses in a month when 5,000 units, weighing 7,000 lbs., with a total sales value of $114,000 are shipped.

Round answers totwo decimal places.