Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger

Exercise 27

Method of Least Squares
Luisa Crimini has been operating a beauty shop in a college town for the past 10 years. Recently, Luisa rented space next to her shop and opened a tanning salon. She anticipated that the costs for the tanning service would primarily be fixed but found that tanning salon costs increased with the number of appointments. Costs for this service over the past eight months are as follows:

Refer to the information for Luisa Crimini on the previous page.
Required:
1. Using a computer spreadsheet program such as Excel, run a regression on these data. Based on the regression output, write the cost formula for tanning. ( Note : Round the fixed cost to the nearest dollar and the variable rate to the nearest cent.)
2. Using the formula computed in Requirement 1, what is the predicted cost of tanning services for September for 2,500 appointments?