1.

Month Revenues Advertising Costs

90000
February $ 51,000 $ 1,500
March $ 72,000 $ 3,500 80000
April $ 56,000 $ 1,000 70000
May $ 64,000 $ 4,000 60000
June $ 56,000 $ 500
50000

Revenue
July $ 64,000 $ 1,500
August $ 64,000 $ 1,000 40000
September $ 83,000 $ 4,500 30000
October $ 56,000 $ 2,000 20000
November $ 61,000 $ 2,000
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Advertising Cos

We evaluate the estimated regression equation using the criteria of economic plausibility, goodness of fit, and slope
Economic Plausibility: Advertising cost appears to be a plausible (masuk akal, dapat diterima) cost driver of revenues
the higher the revenues.
Goodness of Fit: The vertical differences between actual and predicted revenues appears to be reasonably sma
diagram yang tidak berjauhan atau tidak terlalu menyebar). This indicates that advertising cos
Slope of regression lin The slope appears to be relatively sloping (landai). Therefore change in advertising costs doesn

2. Month Revenues Advertising Costs

February $ 51,000 $ 1,500
March $ 72,000 $ 3,500
April $ 56,000 $ 1,000
May $ 64,000 $ 4,000
June $ 56,000 $ 500 >>> Lowest
July $ 64,000 $ 1,500
August $ 43,000 $ 1,000
September $ 83,000 $ 4,500 >>> Highest
October $ 56,000 $ 2,000
November $ 61,000 $ 2,000

High-Low Method:
Advertising costs (X) Revenue (Y)
Highest $ 4,500 $ 83,000
Lowest $ 500 $ 56,000
Difference $ 4,000 $ 27,000

y = a + bx
Revenue = a + b (advertising costs)

Find the coefficient (b):

 b = difference Y line/difference X line
= 27,000/4,000
= 6.75 Revenue function:
Revenue = a + b (advertising cost)
Find the constant (a): Revenue = $ 52,625 + 6.75 (advertising costs)
Revenue = a + b (advertising costs) Revenue = $ 52,625 + 6.75 X
$83,000 = a + 6.75 ($4,500)
a = $ 52,625

3. The increase in revenues for each $ 1,000 spent on advertising within the relevant range is:
a. Using the regression equation --> 6.584 x $1,000= $ 6,584
b. Using the high-low equation --> 6.75 x $1,000 = $ 6,750

The high-low equation does fairly well in estimating the relationship between advertising costs and revenues.
Betha should use the regression equation because it uses information from all obeservation.
The high-low method, on the other hand, relies only on the observation that have the highest and lowest values
of the cost driver and these observations are generally not representative of all the data.
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Advertising Cost

ility, goodness of fit, and slope of regression line.

iterima) cost driver of revenues. The higher advertising cost,

es appears to be reasonably small (jarak vertikal pada titik-titik di scatter

is indicates that advertising costs are related to restaurant revenues.
hange in advertising costs doesn't significantly affect revenue.
sing costs and revenues.

highest and lowest values

 Month Machine-Hours Kilowatt-Hours Total Overhead Costs
April 3800 4520000  $ 138,000
May 3650 4340000  $ 136,800
June 3900 4500000  $ 139,200
July 3300 4290000  $ 136,800
August 3250 4200000  $ 126,000
September 3100 4120000  $ 120,000

1 Machine-hours as cost driver:

Machine-hours (X) Total overhead costs (Y)
Highest 3900 $ 139,200.00
Lowest 3100 $ 120,000.00
Difference 800 $ 19,200.00

Total Costs = a + b (machine hours)

Find the coefficient (b):

b = difference Y line/difference X line
= $ 19.200/800
= $ 24 per machine hour Costs function:
Total Costs = a + b (machine hours)
Find the constant (a): Total Costs = $ 45.600 + $24 (machine hours)
Total Costs = a + b (machine hours) Total Costs = $ 45.600 + $24 X
$ 139.200 = a + $ 24 (3.900)
a = $ 45.600

2 Kilowatt-hours as cost driver:

Kilowatt-hours (X) Total overhead costs (Y)
Highest 4520000  $ 138,000
 Lowest 4120000  $ 120,000
Difference 400000 $ 18,000

Total Costs = a + b (kilowatt hours)

Find the coefficient (b):

b = difference Y line/difference X line
= $ 18.000/400.000
= $ 0,045 per kilowatt hour Costs function:
Total Costs = a + b (kilowatt hours)
Find the constant (a): Total Costs = -$ 65.400 + $ 0,045 (kilowatt hours)
Total Costs = a + b (kilowatt hours) Total Costs = -$ 65.400 + $ 0,045 X
$ 138.000 = a + $ 0,045 (4.520.000)
a = - $65.400

3 October's estimated costs:

with machine hours = $ 45.600 + $ 24 (3.000) = $ 117.600
with kilowatt hours = - $ 65.400 + $ 0,045 (4.000.000) = $ 114.600

The best estimator for October was the kilowatt-hour cost driver