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Waveney DIY Centers $($WDC$)$ operates a few dozen stores in the eastern United States. The stores are popular with home remodelers, contractors, and do$-$it$-$yourself customers. The managers at Waveney are interested in understanding what drives costs as well as getting better cost estimates when planning new stores. The area manager for the Southeast Region is interested in new data analysis approaches to management and offered to run a test using data from the $14$ stores in the region.

The initial thoughts of the managers and the financial analysts in the region were that two primary factors drove store costs: store area $($square footage$)$ and revenue. The following data were collected from the most recent year of operations $($revenues and costs in thousands of dollars$).$

Store Revenues

$($$$000)$ Area

$($Square Feet$)$ Costs

$($$$000)$

SE$-01$ $ $20,84569,447$ $ $16,099$

SE$-0215,78251,71712,795$

SE$-0326,02183,63119,510$

SE$-0419,68967,67415,379$

SE$-0519,96658,80915,412$

SE$-0618,05667,67414,399$

SE$-0724,80596,04818,991$

SE$-0813,00146,39811,047$

SE$-0923,38178,31217,753$

SE$-1016,13062,35513,164$

SE$-1120,65865,90115,933$

SE$-1217,42072,99314,097$

SE$-1313,97462,35511,870$

SE$-1423,20474,76617,594$

Required:

Use the high$-$low method to estimate the fixed and variable portions of store costs based on store area.

The managers in the region are interested in opening a new store with expected area of $51,500$ square feet. Assuming the data and cost estimates from the current stores are appropriate for the new store $($SE$-16),$ what are the estimated store costs for store SE$-16?$

Managers are also considering a concept store focused on downtown home and condo owners. These stores would have a much smaller area and carry a narrower range of products. The managers envision such stores being an average of $36,500$ square feet. What are the estimated store costs for the average concept store?

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