Question
The Deli CitySandwich Shop tries to maintain a constant markup on direct costs.Consequently it wasfeltthat theircost function could be stated interms relativeto salesdoll.ws.Infact,aregressionbasedon18monthsofcostandrevenuedataproducedthefoDDWlllg costequation cost-0.6sales+$2,400permonth
The Deli CitySandwich Shop tries to maintain a constant markup on direct costs.Consequently it wasfeltthat theircost function couldbestated interms relativeto salesdoll.ws.Infact,aregressionbasedon18monthsofcostandrevenuedataproducedthefoDDWlllg
costequation
cost-0.6sales+$2,400permonth
TheequationhadanR2of.87andthe standarderroroftheestimate was$245.
Required
- Whatisthe90%confidenceinterval onmonthlynetincomeifsalesaverage$7,000 per
month?
- If salesare$8,000inamonth,howconfidentcanthefirmbeofearning morethan$500?
- Whatlevelofsalesarerequiredpermonthforthefirmtobe90%confident ofearning
atleast$1,000?
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Accounting Principles Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
8th Canadian Edition
111950242X, 1-119-50242-5, 978-1119502425
