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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. The following data were collected from last year’s operations (revenues and costs in thousands of dollars).
Store Revenues Costs
101 $4,120 $4,244
102 2,247 2,934
103 5,768 5,211
104 4,022 4,048
105 2,944 3,736
106 4,063 3,389
107 6,914 5,059
108 1,809 2,474
109 5,516 4,768
110 3,288 3,019
111 3,926 4,229
112 4,740 3,240
113 3,572 2,616
114 4,897 4,695
115 2,224 3,016
Simple regression results from the data of Davis Stores are as follows.
Equation:
Store costs = $1,684.0 + (Revenue x 53.2%)
Statistical data
Correlation coefficient 0.837
R2 0.701
Required A:
- Estimate store costs for a store with revenue of $2.7 million.
Estimate store costs for a store with revenue of $2.7 million. (Enter the answer in thousands of dollars. Round your answer to 2 decimal places.)
Store cost ____________________
Required B:
- What percentage of the variation in store costs is explained by the independent variable?
Percentage of variation in store cost ________________
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