Kara Tran, owner of Flower Paradise, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Tran wants to set the delivery fee based on the distance driven to deliver the flowers. Tran wants to separate the fixed and variable portions of her van operating costs so that she has a better idea how delivery distance affects these costs. She has the following data from the past seven months: (Sa Month Miles Driven Van Operating Costs sate
January 15,500 $5,390
February 17,400 $5,280
March 15,400 $4,960
April 16,300 $5,340
May 16,500 $5,450
June 15,200 $5,230
July 14,400 $4,680
Requirements:
1. Determine the firm's cost equation (use the output from the Excel regression).
2. Determine the R-square (use the output from the Excel regression). What does Flower Power's R-square indicate?
The R-square indicates that the cost equation explainsof the variability in the data. In other words, itFlower Powerfeel confident using this costs equation to predict the total cost at other volumes within the same relevant range.
3. Predict van operating costs at a volume of 16.000 miles.