Q.
CRSL is continuing to re-evaluate all aspects of the business and would like you to look into staffing costs. Below is a summary of monthly staff and customer numbers and staff costs.
|
|
Staff Number
|
Number of customers
|
Staff cost ($)
|
|
January
|
20
|
700
|
27 800
|
|
February
|
22
|
250
|
14 000
|
|
March
|
10
|
200
|
12 000
|
|
April
|
20
|
500
|
20 000
|
|
May
|
24
|
650
|
23 800
|
|
June
|
28
|
450
|
18 400
|
|
July
|
16
|
50
|
20 400
|
|
August
|
14
|
150
|
8 200
|
|
September
|
24
|
350
|
18 800
|
|
October
|
24
|
600
|
22 200
|
|
November
|
16
|
300
|
16 600
|
|
December
|
32
|
750
|
32 200
|
CRSL's relevant range has been estimated to be between 300 and 600 customers.
Required:
a) Draw a scatter diagram of CRSL customers and staff costs and mark the relevant range
b) Use the high-low method to estimate the behaviour of CRSL staff cost based on customer numbers within the relevant range. Use an equation to express the results of this estimation method.
c) Using Excel or a similar program construct a regression analysis to estimate:
i) The equation to predict staff costs based on the number of visitors within the relevant range
ii) Based on the equation in c i) what would the staff cost be with 400 visitors per month
iii) Using both activities - number of visitors and staff numbers, determine what the staff cost, within the relevant range would be.
d) Does the inclusion of the additional cost driver (number of staff) improve the regression model? Explain your answer?
e) Of the three methods - high-low, single regression and multiple regression - which method would you be most confident in presenting to the Board of Directors? Explain your answer?