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Question: Bob Jones owns a catering company that

Bob Jones owns a catering company that prepares food and beverages for banquets and parties. For a standard party the cost on a per-person basis is as follows:
Bob Jones owns a catering company that prepares food and beverages for banquets and parties. For a standard party the cost on a per-person basis is as follows:


Jones is quite certain about his estimates of the food, beverages, and labor costs but is not as comfortable with the overhead estimate. The overhead estimate was based on the actual data for the past 12 months, which are presented here. These data indicate that overhead costs vary with the direct labor-hours used. The $14 estimate was determined by dividing total overhead costs for the 12 months by total labor-hours.


Jones has recently become aware of regression analysis. He estimated the following regression equation with overhead costs as the dependent variable and labor-hours as the independent variable:

Required:
1. Plot the relationship between overhead costs and labor-hours. Draw the regression line and evaluate it using the criteria of economic plausibility, goodness of fit, and slope of the regression line.
2. Using data from the regression analysis, what is the variable cost per person for a standard party?
3. Bob Jones has been asked to prepare a bid for a 200-person standard party to be given next month. Determine the minimum bid price that Jones would be willing to submit to recoup variable costs.

Jones is quite certain about his estimates of the food, beverages, and labor costs but is not as comfortable with the overhead estimate. The overhead estimate was based on the actual data for the past 12 months, which are presented here. These data indicate that overhead costs vary with the direct labor-hours used. The $14 estimate was determined by dividing total overhead costs for the 12 months by total labor-hours.
Bob Jones owns a catering company that prepares food and beverages for banquets and parties. For a standard party the cost on a per-person basis is as follows:


Jones is quite certain about his estimates of the food, beverages, and labor costs but is not as comfortable with the overhead estimate. The overhead estimate was based on the actual data for the past 12 months, which are presented here. These data indicate that overhead costs vary with the direct labor-hours used. The $14 estimate was determined by dividing total overhead costs for the 12 months by total labor-hours.


Jones has recently become aware of regression analysis. He estimated the following regression equation with overhead costs as the dependent variable and labor-hours as the independent variable:

Required:
1. Plot the relationship between overhead costs and labor-hours. Draw the regression line and evaluate it using the criteria of economic plausibility, goodness of fit, and slope of the regression line.
2. Using data from the regression analysis, what is the variable cost per person for a standard party?
3. Bob Jones has been asked to prepare a bid for a 200-person standard party to be given next month. Determine the minimum bid price that Jones would be willing to submit to recoup variable costs.

Jones has recently become aware of regression analysis. He estimated the following regression equation with overhead costs as the dependent variable and labor-hours as the independent variable:
Bob Jones owns a catering company that prepares food and beverages for banquets and parties. For a standard party the cost on a per-person basis is as follows:


Jones is quite certain about his estimates of the food, beverages, and labor costs but is not as comfortable with the overhead estimate. The overhead estimate was based on the actual data for the past 12 months, which are presented here. These data indicate that overhead costs vary with the direct labor-hours used. The $14 estimate was determined by dividing total overhead costs for the 12 months by total labor-hours.


Jones has recently become aware of regression analysis. He estimated the following regression equation with overhead costs as the dependent variable and labor-hours as the independent variable:

Required:
1. Plot the relationship between overhead costs and labor-hours. Draw the regression line and evaluate it using the criteria of economic plausibility, goodness of fit, and slope of the regression line.
2. Using data from the regression analysis, what is the variable cost per person for a standard party?
3. Bob Jones has been asked to prepare a bid for a 200-person standard party to be given next month. Determine the minimum bid price that Jones would be willing to submit to recoup variable costs.

Required: 1. Plot the relationship between overhead costs and labor-hours. Draw the regression line and evaluate it using the criteria of economic plausibility, goodness of fit, and slope of the regression line. 2. Using data from the regression analysis, what is the variable cost per person for a standard party? 3. Bob Jones has been asked to prepare a bid for a 200-person standard party to be given next month. Determine the minimum bid price that Jones would be willing to submit to recoup variable costs.





Transcribed Image Text:

Food and beverages Labor (0.5 hour X $10 per hour) Overhead (0.5 hour × $14 per hour) Total cost per person $15 $27 Month Labor-Hours Overhead Costs January 2,500 $ 55,000 February 2,700 59,000 March 3,000 60,000 April May 4,200 64,000 7,500 000 ,רר June 5,500 71,000 July 6,500 74,000 August September 4,500 67,000 7,000 75,000 October 4,500 68,000 November 3,100 62,000 December 6,500 73,000 Total 57,500 $805,000 y = $48,271 + $3.93X



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