Selecting a Basis for Predicting Shipping Expenses (Requires Computer Spreadsheet*)
Penn Company assembles and sells computer boards in western Pennsylvania. In an effort to improve the planning and control of shipping expenses, management is trying to determine which of three variables-units shipped, weight shipped, or sales value of units shipped has the closest relationship with shipping expenses. The following information is available:
|
Month
|
Units Shipped
|
Weight Shipped (lbs)
|
Sales value of Units Shipped
|
Shipping Expenses
|
|
May
|
3,000
|
6,200
|
$100,000
|
$5,600
|
|
June
|
5,000
|
8,000
|
110,000
|
7,700
|
|
July
|
4,000
|
8,100
|
80,000
|
6,500
|
|
August
|
7,000
|
10,000
|
114,000
|
10,400
|
|
September
|
6,000
|
7,000
|
140,000
|
8,600
|
|
October
|
4,500
|
8,000
|
160,000
|
8,200
|
Required:-
a. With the aid of a spreadsheet program, determine whether units shipped, weight shipped or sales value of units shipped has the closest relationship with shipping expenses.
b. Using the independent variable that appears to have the closest relationship to shipping expenses, develop a cost-estimating equation for total monthly shipping expenses.
c. Use the equation developed in requirement (b) to predict total shipping expenses in a month when 5,000 units, weighing 7,000 lbs., with a total sales value of $114,000 are shipped.