Question: An expert is analyzing the cost behavior patterns of the defendant in an antitrust dispute. The expert plans to use the information to prepare a damage estimate. The expert analyzed 30 months of cost and sale data for the Downtown Department Store. The results of regression-correlation analyses on the store's six cost categories regressed against sales dollars are as follows: Account Cost of goods sold Store salaries Store utilities Store maintenance Advertising Corporate overhead a value b value r squared $45,000 .46 .88 $65,000 .055 .72 $26,000 .015 .34 $14,000 .08 .035 $26,000 .01 .001 $75,000 .025 .045
a. Use the cost behavior data presented above to make a point estimate of expected costs and net income for the month of July (assuming sales of $980,000).
b. How would you describe (categorize) each of the costs?
c. How strong do you feel about estimations you made in part a?