Dylan Flaherty, marketing clerk for TipTop Marketing Agency, recorded the following information for last year:

He would like to be able to estimate customer service costs using the number of customers as the basis for estimation. However, because he has never taken a course in managerial accounting, he does not know how to set up a cost equation. He has therefore approached you for help.

Required:

1. Set up a cost equation for monthly customer service costs using the high?low method.

2. Using the equation from part (1), compute the estimated customer service costs if the number of customers is expected to be 550.

3. You also used the least-squares regression method to do the analysis of the costs; the analysis resulted in the following output:

Intercept: .......................................................82,231.04Coefficient of X-variable: ................................1,227.02Adjusted R square: .................................................0.91

? Set up a cost equation using the above numbers.

? Explain the significance of R square.

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Month Number of Customers Customer Service Costs January 341 $524,908 February 402 542,010 March 318 479,280 496 698,340 April May 385 528,250 June 442 654,660 July 351 541,970 678,900 August 480 September 330 468,540 October 498 679,440 November 428 626,780 December 400 540,500