1. Prepare a statistical analysis of the costs provided.

a. Plot the purchase department cost vs. each cost driver (include these at the end of the memo as an attachment, one graph per page).

b. Analyze the data for potential problems, correct data problems if necessary, and report any changes made.

c. Use regression analysis to develop cost models for all potential cost drivers.

d. Identify the best model, and explain why. e. Explain what the model means from an economic perspective.

2. Use the model to make two recommendations to the CWWR management team for improving the efficiency of purchasing operations.

a. Be specific with details of the recommendations.

b. Estimate the cost savings from the implementation of your recommendations.

c. Consider secondary implications, quantitative and/or qualitative.

d. Indicate how these changes (recommendations) should be implemented.

Purchasing Dept. Cost (US$) $575,000 Number of Purchase Orders Number of Suppliers Store Location Sheridan 1,708 61 Denver 2,519 95 1,226,000 1,710,000 881,000 Merchandise Purchased (US$) $47,239,000 102,364,000 100,162,000 95,760,000 51,466,000 50,631,000 Salt Lake City Kansas City 2,506 139 1,719 91 Omaha 2,883 155 1,544,000 794,000 Milwaukee 647 75 84,753,000 2,978 103 1,341,000 794,000 103,464,000 3,761 117 Minneapolis Phoenix Las Vegas Albuquerque Tucson 2,584 73 176 5,497 4,347 130 2,878 62 Houston Oklahoma City Tulsa 819 129 145 2,216,000 2,030,000 1,338,000 856,000 1,122,000 863,000 1,085,000 952,000 1,134,000 1,042,000 1,634,000 699,000 Dallas 96,162,000 62,364,000 65,635,000 88,524,000 72,645,000 61,638,000 105,666,000 59,437,000 38,542,000 33,020,000 36,322,000 34,121,000 31,920,000 141 1,247 2,162 2,822 5,115 San Antonio 105 Austin 51 El Paso 382 131 Nashville 5,293 172 967 34 Memphis Indianapolis 875,000 2,425 48