Interpretation of Regression Results: Simple Regression
A local restaurant, Fred's Fish Fry, is estimating nonfood kitchen costs (labor, supervision, utilities, etc.) based on food cost. Data were gathered for the past 24 months and analyzed using a spreadsheet program. The following output was generated:
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Equation Intercept
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$14,000
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Coefficient on food cost
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225%
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Statistical data
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Correlation coefficient
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0.483
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R2
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0.233
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The company is planning to operate at a level of $15,000 of food costs per month for the coming year.
Required
a. Use the regression output to write the nonfood cost equation.
b. Based on the cost equation, compute the estimated nonfood kitchen costs (labor, supervision, utilities, etc.) per month for the coming year.
c. Fred has asked you for advice on whether he should rely on the estimate. What will you say?