This paper circulates around the core theme of Selecting the two best regressions from part (c) conduct a multiple regression of overhead against these two independent variables. Evaluate the regression results. If there should be a problem identify the problem and draw conclusions about the best of t together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
The CEO of Milton Manufacturing Company has asked you to develop a
cost equation to predict monthly overhead costs in its production
department. You have collected the following data for the last 10
months: Overhead costs (OH$) and the proposed independent variables:
Number of machine hours worked (MH), number of direct labour hours (DLH)
and number of indirect labour workers (IL Workers).
| OH ($) |
MH |
DLH |
IL Workers |
| 2,000 |
9,500 |
1,800 |
3 |
| 4,500 |
20,000 |
4,200 |
8 |
| 3,000 |
14,000 |
2,500 |
15 |
| 2,700 |
13,000 |
2,400 |
10 |
| 6,000 |
28,000 |
5,000 |
16 |
| 5,100 |
25,000 |
4,800 |
12 |
| 8,000 |
42,000 |
8,100 |
6 |
| 4,800 |
25,000 |
4,500 |
8 |
| 7,500 |
35,000 |
6,900 |
14 |
| 6,500 |
32,000 |
6,000 |
11 |
(a) The CEO suggests that he has heard that the high-low method of estimating costs works
fairly well and should be inexpensive to use. Write a response to this
suggestion for the CEO indicating the advantages and disadvantages,
including the calculation of a cost equation for this data using MH as
the cost driver. (5 marks)
(b) Using Excel develop three scatter diagrams showing overhead costs
against each of the proposed independent variables. Comment on whether
these scatter diagrams indicate that linearity is a reasonable
assumption for each. (5 marks)
(c) Using the regression module of Excel’s Add-in Data Analysis,
perform 3 simple regressions by regressing overhead costs against each
of the proposed independent variables. Evaluate each of the regression
results, indicating which is best and why. Provide the cost equations
for those regression results which are satisfactory and from them
calculate the predicted overhead in a month where there were 10,000 MH
and 3,000 DLH worked. (5 marks)
(d) Selecting the two best regressions from part (c) conduct a
multiple regression of overhead against these two independent variables.
Evaluate the regression results. If there should be a problem identify
the problem and draw conclusions about the best of the four regression
results to use. (5 marks)
