Susan Supplies Ltd is a wholesaler for a large variety of plumbing supplies. The company's accountant, Moriss, has recently completed a cost study of the firm's Shipping Department in which he used the kilograms of supplies loaded or unloaded at the company's loading dock to quantify the department's activity. Susan supplies compiled the following data

Month Kilograms of supplies

unloaded or loaded

Shipping

Department costs

January 3 800 $ 23 400

February 3 200 22 600

March 2 600 22 500

April 2 000 20 400

May 4 400 22 200

June 4 800 25 100

July 4 000 24 000

August 3 600 22 800

September 5 200 26 240

October 2 200 22 100

November 2 400 22 700

December 2 800 22 700

Required:

A. Draw a scatter diagram of the cost data for the Shipping Department. [2 Marks]

B. Estimate the Shipping Department's cost behaviour using the high-low method. Use an

equation to express the results of this estimation method. [5 Marks]

C. Using the equations estimated in Part 2 predict the Shipping Department's costs for a

month when loads totalling 5500 kilograms are moved. [2 Marks]

D. Prepare least squares regression analysis to estimate the variable and fixed components

for the Shipping Department costs. [5 Marks]

E. Based on your spreadsheet write the least squares regression equation for the

Department's costs. [2 Marks]

F. Using the equation from Part E, predict the firm's Shipping Department's costs for a

month when loads totalling 5500 kilograms are moved. [2 Marks]

G. Why do these cost predictions estimated using the high-low and regression methods

differ? Which method do you recommend? Explain your answer. [2 Marks]