Supply costs at Big Corporation chain of gyms are listed below: Management believes that supply cost is a mixed cost that depends on client - visits. Using simple regression analysis (it is simple, rather than multiple, because there is only one independent variable). Estimate the variable and fixed components of this cost. Please show work. Solution Calculation of variable cost per unit = Change in total cost at two levels/ Change in two levels = 28561-28395/11647-11443 = 0.814 Calculation of fixed cost = 28561-(11647*0.814) = 19080 .

1. Supply costs at Big Corporation chain of gyms are listed below:
Management believes that supply cost is a mixed cost that depends on client - visits. Using
simple regression analysis (it is simple, rather than multiple, because there is only one
independent variable). Estimate the variable and fixed components of this cost. Please show
work.
Client - Visits Supply Cost
March 11,647 $28,561
April 11,443 28,395
May 11,975 28,819
June 12,088 28,892
July 11,707 28,622
August 11,193 28,221
September 11,987 28,820
October 11,678 28,578
November 11,826 28,703
Solution
Calculation of variable cost per unit = Change in total cost at two levels/ Change in two levels
= 28561-28395/11647-11443
= 0.814
Calculation of fixed cost = 28561-(11647*0.814)
= 19080
Month No. of clients Total cost Variable cost Fixed Cost
March 11647 28561 9481 19080
April 11443 28395 9315 19080

2. May 11975 28819 9739 19080
June 12088 28892 9812 19080
July 11707 28622 9542 19080
August 11193 28221 9141 19080
September 11987 28820 9740 19080
October 11678 28578 9498 19080
November 11826 28703 9623 19080