3-32 ** High-low method, regression analysis OBJECTIVES 4, 5Rockhampton College has recently opened a restaurant as part of its hospitality major. For the first 10 weeks the manager didnot estimate any costs but instead hoped revenues would cover costs. One of the new waiters, who happens to be taking a costaccounting class, suggests that the manager take the past known weekly costs and try to determine a cost equation by relating thecost to the number of customers served. The cost and customer data are as follows:WeekNumber of customers per week Weekly total costs of restaurant751$1680074516597381017 800483318 60082587617900196007855189008.89718500925203051091020000The manager gives this information to the waiter, who runs a regression and gets the following equation:Weekly total restaurant costs = $2453 + ($19.04 × Number of customers per week)Required1 Plot the relationship between number of customers per week and weekly total restaurant costs.2 Estimate the cost equation using the high-low method and draw this line on your graph.3 Draw the regression line on your graph. Use your graph to evaluate the regression line using the criteria of economic plausibility,goodness of fit and significance of the independent variable. Is the cost function estimated using the high-low method a closeapproximation to the cost function estimated using the regression method? Explain briefly.4 At what point (number of customers) will the expected total cost based on the high-low equation equal the expected total costbased on the regression equation?

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between number of customers per week and weekly total restaurant costs. quation using the high-low method and draw this line on your graph. line on your graph. Use your graph to evaluate the regression line using the criteria of economic I significance of the independent variable. Is the cost function estimated using the high-low met

between number of customers per week and weekly total restaurant costs. quation using the high-low method and draw this line on your graph. line on your graph. Use your graph to evaluate the regression line using the criteria of economic I significance of the independent variable. Is the cost function estimated using the high-low met

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter9: Applications Of Cost Theory

Section: Chapter Questions

Problem 1.2CE

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