Question

Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. During a discussion, one of the managers suggests that number of employees might be better at explaining cost than store revenues. As a result of that suggestion, managers collected the following information from last year’s operations (revenues and costs in thousands of dollars):

Store	Costs	Employees	Revenues
101	$2,323	40	$5,881
102	1,926	25	4,424
103	2,941	28	6,983
104	2,728	37	6,937
105	2,497	49	5,322
106	5,206	50	3,339
107	2,924	44	4,807
108	3,168	40	2,829
109	2,775	28	4,709
110	5,917	57	4,640
111	2,452	32	3,806
112	3,128	28	5,005
113	3,282	37	3,298
114	4,880	42	4,910
115	5,157	54	4,889

d-1. Enter the regression coefficients.

d-2. Estimate the cost of a store with 42 employees using the results from a simple regression of store cost on employees.

Enter the regression coefficients. (Round your answers to 2 decimal places. Negative amounts should be indicated by a minus sign.)

	Intercept Employees

Estimate the cost of a store with 42 employees using the results from a simple regression of store cost on employees. (Round your intermediate calculations and final answer to 2 decimal places.)

	Store cost

Answer 1

The summary of the regression is shown below. Your questions have been addressed subsequently.

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.729124426
R Square	0.531622429
Adjusted R Square	0.495593385
Standard Error	876.7669739
Observations	15
ANOVA
	df	SS	MS	F	Significance F
Regression	1	11342765	11342764.69	14.75538541	0.00204102
Residual	13	9993364.2	768720.3265
Total	14	21336129
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	-101.598197	944.38262	-0.107581603	0.915970216	-2141.812812	1938.616419	-2141.8128	1938.6164
X Variable 1	89.38743308	23.270257	3.84127393	0.00204102	39.11509838	139.6597678	39.1150984	139.65977

Part d - 1 Enter the regression coefficients. (Round your answers to 2 decimal places. Negative amounts should be indicated by a minus sign.)

Intercept	-101.60
Employees	89.39

Part d - 2

Estimate the cost of a store with 42 employees using the results from a simple regression of store cost on employees. (Round your intermediate calculations and final answer to 2 decimal places.)

Cost = Intercept + Coefficient x Employees = - 101.60 + 89.39 x 42 = $  3,652.67