Jim Carey (JC) incorporated operates a lawn business in Regina, Saskatchewan. The company provides landscaping services and charges clients based on both the direct labour hours and cost of equipment rental. In addition to landscaping services.
The CEO, Donald Carey, is however worried because JC has been operating at a loss for the past two years. After reviewing details of landscaping revenue, he is convinced that the company should be charging the clients a higher amount for their services.
Donald has approached you as a recent accounting graduate of the university of Regina to run some cost analysis on three key aspects of his projects: Direct Labour (DL) hours; Equipment rental cost and; Number of large trees in the job. He has provided you with data for 4 years (in the worksheet 'Data') and is highly confident in your skills to help him identify the appropriate base(s) to charge clients for landscaping projects.
Required
A. Use scatter graphs and regressions to determine the best cost formula to predict landscaping costs. Make a recommendation to Donald on the best model. Justify your choice.
Hint: consider both simple and multiple regressions.
Use the Question 1 Solution worksheet for your answers.
B. Use your best predicted equation in part 'A' and a random month from the data to calculate expected landscaping cost. Compare this expected cost with the actual cost and comment on your finding.
