The following regression analysis output is for Watson Company's cost of paying sales people salary plus commission as a percent of sales on a monthly basis:

a.Use the regression output above to develop the cost equation Y = f + vX.
b.What would be Watson's estimated costs if it had sales of $2,000,000 next month?
c.What concerns would you have if Watson's CEO wanted you to compute estimated costs based on $8,000,000 sales for next month,when sales amounts have never exceeded $3,000,000?

Question

The following regression analysis output is for Watson Company's cost of paying sales people salary plus commission as a percent of sales on a monthly basis:
  
a.Use the regression output above to develop the cost equation Y = f + vX.
b.What would be Watson's estimated costs if it had sales of $2,000,000 next month?
c.What concerns would you have if Watson's CEO wanted you to compute estimated costs based on $8,000,000 sales for next month,when sales amounts have never exceeded $3,000,000?

Quizplus · Accepted Answer

The Answer of The following regression analysis output is for Watson Company's cost of paying sales people salary plus commission as a percent of sales on a monthly basis:
  
a.Use the regression output above to develop the cost equation Y = f + vX.
b.What would be Watson's estimated costs if it had sales of $2,000,000 next month?
c.What concerns would you have if Watson's CEO wanted you to compute estimated costs based on $8,000,000 sales for next month,when sales amounts have never exceeded $3,000,000?

The Following Regression Analysis Output Is for Watson Company's Cost