Question
Cost analysis for a shipping department. Multiple regression is used by accountants in cost analysis to shed light on the factors that cause costs to
Cost analysis for a shipping department.Multiple regression is used by accountants in cost analysis to shed light on the factors that cause costs to be incurred and the magnitudes of their effects. Sometimes, it is desirable to use physical units instead of cost as the dependent variable in a cost analysis (e.g., if the cost associated with the activity of interest is a function of some physical unit, such as hours of labor). The advantage of this approach is that the regression model will provide estimates of the number of labor hours required under different circumstances, and these hours can then be costed at the current labor rate (Horngren, Foster, and Datar, Cost Accounting, 2006). The sample data shown in the table below have been collected from a firm's accounting and production records to provide cost information about the firm's shipping department. These data are saved in the file. Consider the model
y = 0+ 1x1+ 2x2+ 3x3+
a. Find the least squares prediction equation.
b. Use an F-test to investigate the usefulness of the model specified in part a. Use = .01 and state your conclusion in the context of the problem.
c. Test H0: 2= 0 versus H : 2 0 using = .05. What do the results of your test suggest about the magnitude of the effects of x2 on labor costs?
d. Find R2and interpret its value in the context of the problem. For part D use the #'s attached.
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