A number of terms are listed below:
Account analysis method
Economic plausibility
High-low method
Ordinary least squares (OLS)
Predictor variable
T-stat
Conference method
Explanatory power
Industrial engineering method
Simple linear regression
Method
P-value
Correlation
Goodness of fit
Linear cost function
Outcome variable
R2
Time series
Required
Select the terms from the above list to complete the following sentences.
There are several methods of quantitative analysis that a management team can use to predict the value of a single overhead cost pool in a traditional costing system. The methods are _______, _______, _______, _______, and _______ . There are different criteria to consider when choosing a method of analysis which are: affordability, understandability, data availability and quality, _______, and _______. The relationship between cost of unequally shared resources used in production, and their benefit to distinct types of cost objects must be economically plausible. The change in quantity of resources used must be a good measure of change in benefit. The relationship must be a _______ if OLS simple linear regression analysis is to be used. Ideally, the OLS will be based on at least 25 data points observed and reported in the past as a _______. If insufficient data are available then the other methods of analysis will help the management team predict the value of the indirect cost pool. When true, the orderly change in the quantity of resource used will explain a large proportion of the change in the indirect cost pool. This is called _______. A high explanatory power indicates a high _______ between the change in the measure of benefit or the _______ variable, X, and the change in the predicted indirect cost pool or _______, y. You can observe this in the _______ between the predicted (X, y) line and the actual data points (X, Y) from which the prediction was made. The measure of goodness of fit is called _______. Other important statistics that assess the reliability of the predicted regression line are the _______ and _______. While the OLS is a very rigorous analysis and can predict future values at a specific _______, it is not appropriate for all situations.