Kim Wilson, controller for Max Enterprises, has decided to estimate the fixed and variable components associated with the company's shipping activity. She has collected the following data for the past six months:
|
Packages Shipped
|
Total Shipping Costs ($)
|
|
10
|
800
|
|
20
|
1,100
|
|
15
|
900
|
|
12
|
900
|
|
18
|
1,050
|
|
25
|
1,250
|
Required:
1. Estimate the fixed and variable components for the shipping costs using the high- low method. Using the cost formula, predict the total cost of shipping if 14 packages are shipped.
2. Estimate the fixed and variable components using the method of least squares. Using the cost formula, predict the total cost of shipping if 14 packages are shipped.
3. For the method of least squares, explain what the coefficient of determination tells us.