Question

Walt's Marina generated the following regression based on the number and cost of daily rentals of its boat slips to boat owners each month.

SUMMARY OUTPUT
Regression Statistics
Multiple R 0.425358
R Square 0.481216
Adj RSquare 0.456695
Stand. Error 39.35892
Observations
ANOVA Sig
df SS MS F sig F
Regression 1 43,034.7 43,034.71 0.000151
Residual 13 20,138.6 1,549.12
Total 14 63,173.3
MS Full 27.780017 | 14 Intercept X Variable 1
Coefficients Std Error t Stat P-value Lower Upper Lower Upper
95% 95% 95% 95%
Intercept 2621.21101.8073 2.626725 0.020917 47.478460 487.3612 47.478460 X variable 35.58 6.1023 5.270675 0.000151 18.980154 45.3467 18.980154
Walt's Marina rents 45 boat slips each month (within relevant range), how much is its total cost for boat slip rentals?
A. $4,222
B. $8,722
C. $4,581
D. Not available based on the information
Which one of the following is a purely fixed cost?
1000 units 2000 units
Total Per Unit Total Per Unit
Cost A 500 0.2 1000 0.2
Cost B 2000 5 2000 2.5
Cost C 750 3.2 1000 2.4
Cost D 100 0.5 250 0.3
A. Cost A
B. Cost B
C. Cost C
D. Cost D

Answer 1

The answer is "Option A and Option B"

Explanation:

In question 1:

The fixed cost=2621.21

The unit variable cost=35.58

Calculating the total cost for 45 boat slips:

`=2621.21+(45 * 35.58)\\\\=2621.21+(1601.1)\\\\=4222.31 \approx 4222`

In question 2:

It is the pure fixed costs that remain consistent in total regardless of dynamic loads. An overall cost B both for 1000 and 2000 unit is unchanged, therefore the Cost B is a fixed sum.