igh-Low Method, Method of Least Squares, Correlation

Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs for the past 10 months. Nizam Sanjay, a member of the controllers department, believes that overhead activities and costs should be classified into groups that have the same driver. He has decided that unloading incoming goods, counting goods, and inspecting goods can be grouped together as a more general receiving activity, since these three activities are all driven by the number of receiving orders. The 10 months of data shown below have been gathered for the receiving activity.

Month	Receiving Orders		Receiving Cost
1		1,000		$12,170
2		1,340		12,940
3		1,150		13,750
4		900		9,930
5		1,350		15,070
6		1,400		14,145
7		1,600		16,640
8		1,490		14,800
9		1,800		17,940
10		1,700		15,000

Required:

1. Choose the correct scatter graph that represents the data provided above.

a.	b.
c.	d.

The correct answer is

abcdc

2. Select two points (1 and 8) that make the best fit, and compute a cost formula for receiving costs. Round intermediate calculations to the nearest cent. Round the intercept to the nearest dollar and round the slope to the nearest cent.

Y

=

$fill in the blank 2

+

$fill in the blank 3X

3. Using the high-low method, prepare a cost formula for the receiving activity. Round the intercept to the nearest dollar and round the slope to the nearest cent.

Y

=

$fill in the blank 4

+

$fill in the blank 5X

4. Using the method of least squares, prepare a cost formula for the receiving activity. Round the intercept to the nearest dollar and round the slope to the nearest cent.

Y

=

$fill in the blank 6

+

$fill in the blank 7X

What is the coefficient of determination? Round your answer to two decimal places. Adjusted R² = fill in the blank 8