The sales manager of ABC Company is checking to see if there is any relationship between promotional costs and ticket revenues at an arena. The manager obtains the following data for the past 9 months:

Month	Ticket Revenues	Promotional Costs
April	$220,000	$55,000
May	290,000	68,000
June	340,000	83,000
July	500,000	93,000
August	450,000	103,000
September	470,000	113,000
October	560,000	123,000
November	690,000	183,000
December	756,500	200,000

1. If Januarys estimated promotional costs total $175,000, what are the total estimated costs of the arena using the cost function determined by the high-low method?

2. Using the memo template in Microsoft Word, write a memo to the arena manager explaining the cost behavior for the arena. Your memo should include a discussion of:

a. The overall behavior of the operating costs as they relate to Promotional Costs as the cost driver, i.e. the cause-and-effect relationship. Can the cost behavior be adequately described by the cost function? Discuss economic plausibility, goodness of fit, and the significance of the independent variable.

b. The cost function determined using the high-low method

c. The cost function determined using the regression method

d. Which method provides a better estimation of costs?