As the management accountant for Pleasanton Raft Company, Inc.,you have been asked to attend a planning session for the nextseason. The owner, Mara Mason specifically wants to be able topredict her fuel costs each coming week.

Mara typically staffs the desk at the river – answering thephone, checking in customers, and taking payment – while her staffdrives the customers and rafts out to the river. Since she is notactively driving the van, it has been her process to maintain aseparate bank account specifically for fuel costs, and giving thedebit card tied to the account to her staff. That way, staffmembers can easily fill the tank on the way back from dropping offcustomers. To limit her risk, Mara wants to keep a low balance inthis account, just sufficient to pay fuel costs for the upcomingweek. To that end, she currently checks the balance in the accounteach Monday morning, and transfers in just enough funds to bringthe balance to $275.

This past season, Mara had some cash flow issues – there were acouple of occasions this year where the company debit card wasdeclined for insufficient funds at the gas station. This can be aserious problem. If the van runs out of gas, she is not able totransport customers to the river, and she will potentially losecustomers. Also, if the charge does go through, she is liable foroverdraft fees. Therefore, Mara wants to improve from her currentprocess of refilling that account to $275 at the beginning of eachweek.

Mara started out by collecting data – on each Monday morning,she recorded the price of gas and the number of reservations forthe coming week (see the attached Excel spreadsheet). She wouldlike to use one of these measures to estimate the week’s fuelcosts, but she is not sure which one would give her the bestestimate. The number of reservations tells her how many customershave reserved boats for the coming week, but some reservations arelater cancelled (or no-shows) and many customers show upunannounced for a trip down the river. In addition, the price ofgas on Monday morning usually does not stay the same through theentire week. Mara knows that neither of these variables willperfectly predict her fuel costs, but figures that anything wouldbe better than her current process.

DATA:

Pleasanton RaftCompany, Inc.
FuelCost Data, current year
Week	# ofreservations	Gas price (as ofMonday morning)	Fuel cost (totalcost for the week)
1	3	$2.55	$153.52
2	20	$2.67	$170.79
3	23	$2.64	$249.39
4	10	$2.43	$204.00
5	15	$2.34	$218.31
6	8	$2.64	$170.17
7	24	$2.58	$212.86
8	13	$2.64	$223.35
9	10	$2.33	$160.63
10	1	$2.26	$139.91
11	29	$2.29	$208.70
12	22	$2.75	$244.41
13	41	$2.61	$287.18
14	15	$2.37	$243.92
15	5	$2.31	$198.09
16	30	$2.43	$250.39
17	32	$2.35	$225.19
18	6	$2.21	$286.29
19	35	$2.87	$274.92
20	18	$2.50	$186.28
21	27	$2.58	$211.33
22	27	$2.72	$246.94
23	19	$2.23	$188.97
24	11	$2.25	$177.65
25	7	$2.30	$149.27
26	9	$2.41	$177.60

Fuel COST INFO IS IN THE TABLE - Please let me know what moreinfo do you need? The comments keep saying the same thing but I didprovide the info.

Required:

Write a 1-2 page memo, as the accountant of Pleasanton Rafts,addressed to Mara Mason describing your analysis and the outcomes.Make sure you respond to the following items:

1. Of the three cost estimation methods covered in this class(high-low method, scatter diagrams, or least squares regression),which would give the most accurate cost estimates? Explain why thatmethod is more accurate, and how it works.