You will need to download the application in excel to do the regression. You have to use excel, do not use other applications such as mini-tab or numbers.
Bret’s Accounting & Tax Services is a small but locally well-known accounting firm in Sioux City, IA which completes taxes for individuals. Every year, firms like Bret’s decide how much they will charge to complete and file an individual tax return. This price determines how many tax returns firms complete each year.
Suppose you are an office manager for a firm like Bret’s Accounting and Tax Services and you are trying to determine what your firm should charge next year for tax returns. Use following data to answer these questions.
|
Return Price |
Returns Completed |
|
70 |
932 |
|
70 |
932 |
|
75 |
910 |
|
75 |
920 |
|
80 |
876 |
|
80 |
852 |
|
85 |
811 |
|
80 |
857 |
|
80 |
847 |
|
80 |
865 |
|
90 |
785 |
|
90 |
802 |
|
95 |
789 |
|
95 |
731 |
|
100 |
663 |
|
100 |
709 |
|
90 |
771 |
|
90 |
792 |
|
85 |
831 |
|
80 |
834 |
a) Graph the data using a scatter plot. Using the “Insert Trendline” function in Excel, determine whether you should use linear regression or log-linear. (Place the graph beneath the data; be sure to label both axes.)
b) Using Excel’s Regression Analysis Function, run a regression, present the output, and answer the following questions about your output. (Place your regression results beneath the graph from part a. i) What is your estimated demand function? ii) Discuss the fit and significance of the regression commenting on the F, R-square, t statistics and if it makes sense ore not.
c) How many returns do you expect to be completed if the firms charges $85 per return? What is the elasticity at this point in the demand curve? Are you on the elastic, inelastic, or unit elastic portion of your demand curve? Can you make a recommendation to increase or decrease price with this information?
d) Suppose the firm has a cost function for individual tax returns of TC=5000+10Q. Using functions and Excel’s Solver functionality, determine how much the firms should be charging for a return to maximize profit and the corresponding total revenue, total cost, and profit.
