Dollah Corporation is studying its marketing cost and sales volume, and has generated the following information by use of a scatter diagram and a least-squares regression analysis: $\begin{array} { | l | r | r | }
\hline & \text { Scatter Diagram } & \text { Regression Analysis } \
\hline \text { Vaiable cost per unit sold } & \$ 7.50 & \$ 7.80 \
\text { Total monthly fixed cost } & \$ 55,000 & \$ 52,500 \
\hline
\end{array}$ Dollah is now preparing an estimate for monthly sales of 20,000 units. On the basis of the data presented, compute the most accurate sales forecast possible.
A)$156,000.
B)$202,500.
C)$205,000.
D)$208,500.
E)$211,000.

Question

Dollah Corporation is studying its marketing cost and sales volume, and has generated the following information by use of a scatter diagram and a least-squares regression analysis: $\begin{array} { | l | r | r | } 
\hline & \text { Scatter Diagram } & \text { Regression Analysis } \
\hline \text { Vaiable cost per unit sold } & \$ 7.50 & \$ 7.80 \
\text { Total monthly fixed cost } & \$ 55,000 & \$ 52,500 \
\hline
\end{array}$ Dollah is now preparing an estimate for monthly sales of 20,000 units. On the basis of the data presented, compute the most accurate sales forecast possible.
A)$156,000.
B)$202,500.
C)$205,000.
D)$208,500.
E)$211,000.

Quizplus · Accepted Answer

Using the regression analysis, we can find the equation for the total cost (TC) as follows:
TC = Total monthly fixed cost + Variable cost per unit sold x Sales volume
TC = $52,500 + $7.80 x 20,000 = $208,500
Therefore, the most accurate sales forecast for monthly sales of 20,000 units is $208,500.

Dollah Corporation Is Studying Its Marketing Cost and Sales Volume