Garden State Markets, a chain of convenience grocery stores, has store hours that fluctuate from month to month as the tourist trade varies. The electricity costs and hours of operation for one of the company’s stores follow, for the past six months.
1. Use the high-low method to estimate the cost behaviour for the store’s electricity costs, assuming that the variable costs vary in proportion to the hours of operation. Express the cost behaviour in formula form (Y = α + bX). What is the variable electricity cost per hour of operation?
2 Use regression analysis to estimate the cost behaviour for the store’s electricity costs, Express the cost behaviour in equation form. What is the variable electricity cost per hour of operation?
3 During July, the store will be open 470 hours. Predict the store’s total electricity cost for July using each of the cost estimation methods employed in requirements 1 arid 2.