Refer to the Fourth Street Floral data in E6-51B. Use Microsoft Excel to run a regression analysis, then do the following calculations:

Requirements:

1. Determine the firm’s cost equation (use the output from the Excel regression).
2. Determine the R-squared (use the output from the Excel regression). What does Fourth Street Floral’s R-squared indicate?
3. Predict van operating costs at a volume of 15,500 miles assuming the company would use the cost equation from the Excel regression regardless of its R-squared.
Should the company rely on this cost estimate? Why or why not?

Data From E6-51B:-

Tamika Lotta, owner of Fourth Street Floral, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Lotta wants to set the delivery fee based on the distance driven to deliver the flowers. Lotta wants to separate the fixed and variable portions of the van’s operating costs to get a better idea of how delivery distance affects these costs. Here are the data from the past seven months:

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Month January. February March. Miles Driven Van Operating Costs 15,800 $5,460 17,300 $5,680 14,600 $4,940 April. 16,000 $5,310 May..... 17,100 $5,830 June. 15,400 $5,420 July 14,100 $4,880