Homework SourseKing Wa Restaurant would like to estimate the variable and f
King Wa Restaurant would like to estimate the variable and fixed components of its utilities costs and has compiled the following data for the last five months of operations.
Month
Meals served
Utilities costs
December
560
$372.00
January
300
$333.40
February
220
$317.40
March
400
$357.70
April
600
$382.00
Required: Use the information above to answer the following questions:
1.Use the high-low method to derive the cost formula Y = a + bx
I have got the question 1\'s answer it is Y=280+0.17x
I just want to get help for question 2 and 3
2.Are there any outliers? i.e. pairs of meals and costs that are not close to the cost formula you came up with in 1(a). Prove your response by showing calculations for each month to support.
3.Regardless of your answer to (c) what would the existence of an outlier mean in terms of using the high low method as a means of predicting total cost?2.Are there any outliers? i.e. pairs of meals and costs that are not close to the cost formula you came up with in 1(a). Prove your response by showing calculations for each month to support.
| Month | Meals served | Utilities costs | |
| December | 560 | $372.00 | |
| January | 300 | $333.40 | |
| February | 220 | $317.40 | |
| March | 400 | $357.70 | |
| April | 600 | $382.00 |
Solution
2. Yes, there are outliers as shown in the month-wise calculations below.
3. An outlier is the volume at which the total cost is higher or lower than the total cost calculated using the cost formula derived per the high-low method.
| Month | Meals served | Utilities costs $ | Total cost (using cost formula) | ||
| December | 560 | 372.00 | $280 + (560 x 0.17) | 375.20 | Outlier |
| January | 300 | 333.40 | $280 + (300 x 0.17) | 331.00 | Outlier |
| February | 220 | 317.40 | $280 + (220 x 0.17) | 317.40 | |
| March | 400 | 357.70 | $280 + (400 x 0.17) | 348.00 | Outlier |
| April | 600 | 382.00 | $280 + (600 x 0.17) | 382.00 |
