Mandy Knox is the new manager of the materials storeroom for Timken Manufacturing. Mandy has been asked to estimate future monthly purchase costs for part #696, used in two of Timken's products. Mandy has purchase cost and quality data for the past 9 months as follow:

Month	Cost of Purchase	Quality Purchased
January	$12,468	2,700 parts
Febuary	12,660	2,820
March	17,280	4,068
April	15,816	3,744
May	13,164	2,988
June	13,896	3,216
July	15,228	3,636
August	10,272	2,316
September	14,940	3,552

Estimated monthly purchases for this part based on expected demand of the two products for the rest of the year are as follows:

Month	Purchase Quantity Expected
October	3,360 parts
November	3,720
December	3,000

(SHOW ALL YOUR WORK for the following)

1.) The computer in Mandy's office is down, and Mandy has been asked to immediately provide an equation to estimate the future purchase cost for part #696. Mandy grabs a calculator and uses the high-low method to estimate a cost equation. What equation does she get?

2.) Using the equation from requirement 1, calculate the future expected purchase costs for each of the last 3 months of the year.

3.) After a few hours Mandy's computer is fixed. Mandy uses the first 9 months of data and regression analysis to estimate the relationship between the quantity purchased and purchase costs of part #696. The regression line Mandy obtains is as follows:

y=$2,135.5+3.67X

Evaluate the regression line using the criteria of economic plausibility, goodness of fit, and significance of the independent variable. Compare the regression equation based on the high-low method. Which is a better fit and why?

4.) Use the regression results to calculate the expected purchase costs for October, November, and December. Compare the expected purchase costs to the expected purchase costs calculated using the high-low method in requirement 2. Comment on your results

Answer rating: 100% (QA)

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