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(1015 min.)
E 621
The month with the highest volume is February and the
month with the lowest volume is July. The highlow
method uses
only these two
months
to determine the
cost equation.
Step 1) Find the slope:
Rise
=
y (high)
y
−
(low)
=
($5,748
$5,020)
−
= 0.26 per mile
Run
x (high)
x
−
(low)
(17,300
14,500)
−
miles
Step 2) Find the vertical intercept (the fixed cost
component) by plugging the slope into a cost equation,
using either the February or May data.
Using February data:
y
=
vx + f
$5,748
=
($0.26 per mile × 17,300 miles) + f
f
=
$1,250
Or, Using July data:
y
=
vx + f
$5,020
=
($0.26 per mile × 14,500 miles) + f
f
=
$1,250
Step 3) Write the cost equation:
y = $0.26 x + $1,250
where
y = monthly van operating costs
x = number of miles driven
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View Full Document Predict monthly operating costs when volume is 15,000
miles
y = ($0.26 × 15,000) + $1,250
y = $5,150
(1520 min.)
E 622
Req. 1
Student graphs may vary slightly. For example, some
students may force the origin to show on the graph by
setting the minimum x and y axis values to zero. The
graph title and axes titles may also vary from that
shown.
Van Operating Costs
14,000
14,500
15,000
15,500
16,000
16,500
17,000
17,500
4800 5000 5200 5400 5600 5800 6000
Miles Driven
Costs
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E 622
Req. 2
The Excel regression output looks like this:
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.949707
R Square
0.901943
Adjusted R
Square
0.882332
Standard
Error
115.3003
Observations
7
ANOVA
df
SS
MS
F
Significanc
e
F
Regression
1
611411.1
611411.1 45.99092
0.00106
Residual
5
66470.85
13294.17
Total
6
677882
Coefficient
s
Standard
Error
T Stat
Pvalue
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
802.3909
677.7279
1.183943 0.289648
939.761

2544.543
939.761

2544.543
X Variable
0.290029
0.042767
6.781661
0.00106
0.180094
0.399965
0.180094 0.399965
Req. 3
Based
on
the
Excel
output,
Flower
Power’s
van
operating cost equation is:
y = $0.29 x + $802.39
where
y = monthly van operating costs
x = miles driven
coefficient” (.290029) and the “intercept coefficient”
(802.3909) on the Excel output.
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This note was uploaded on 04/25/2008 for the course ACCT 101 taught by Professor Kang during the Fall '08 term at S.F. State.
 Fall '08
 Kang

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