Multiple regression is used by accountants in cost analysis to shed light on the factors that cause
Question:
y = β0 + β1x1 + β2x2 + β3x3 + ε
a. Find the least squares prediction equation.
b. Use an f-test to investigate the usefulness of the model specified in part a. Use α = .01 and state your conclusion in the context of the problem.
c. Test H0: β2 = 0 versus Ha: β2 ≠ 0 using α = .05. What do the results of your test suggest about the magnitude of the effects of x2 on labor costs?
d. Find R2 and interpret its value in the context of the problem.
e. If shipping department employees are paid $7.50 per hour, how much less, on average, will it cost the company per week if the average number of pounds per shipment increases from a level of 20 to 21? Assume that x1 and x2 remain unchanged. Your answer is an estimate of what is known in economics as the expected marginal cost associated with a 1-pound increase in x3.
f. With what approximate precision can this model be used to predict the hours of labor?
g. Can regression analysis alone indicate what factors cause costs to increase? Explain.
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Related Book For
Statistics For Business And Economics
ISBN: 9780321826237
12th Edition
Authors: James T. McClave, P. George Benson, Terry T Sincich
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