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Managerial Accounting - Master File

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Managerial Accounting for Undergraduates, 2e

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Least Squares Regression Analysis

Bogota Corporation has gathered data on its overhead activites and associated costs for the past 12 months. Josh Hopper, from the accounting department, has convinced management that overhead costs can be better estimated and controlled if the fixed and variable components of each overhead activity are known. One such activity is the purchasing department (receiving and reviewing purchase recquisitions, issuing purchase orders, and managing vendor relationships), which he believes is driven by the number of purchase orders issued. Twelve months of data have been gathered for the purchasing activity and are as follows:

Month	Purchase Orders Issued	Purchasing Cost
1	1,050	$23,738
2	750	16,788
3	1,550	35,113
4	1,250	27,263
5	1,350	27,463
6	1,150	27,988
7	1,650	34,388
8	1,450	29,213
9	1,750	38,663
10	950	21,938
11	1,250	25,688
12	1,500	34,200

a. Run a regression using Excel or a similar computer spreadsheet program. Provide the intercept, slope, and R² for the regression.

Round Intercept and Slope to two decimal places. Round R² to three decimal places.

Intercept $Answer

Mark 0.00 out of 1.00

Slope $Answer

Mark 0.00 out of 1.00

R² Answer

Mark 0.00 out of 1.00

b. Using the results from requirement a, prepare a cost formula for the purchasing activity.

Total cost = $Answer

Mark 0.00 out of 1.00

+ ($Answer

Mark 0.00 out of 1.00

x #purchase orders issued)

c. Using the formula from requirement b, what is the predicted cost of purchasing for a month in which 1,375 purchase orders are issued? (Note: Round your answer to the nearest dollar.)My Subscriptions

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Managerial Accounting - Master File

1. My Subscriptions
2. Courses
3. Managerial Accounting - Master File
4. Chapter 6
5. Chapter Six Homework

Skip Chapter Six Homework Navigation

Chapter Six Homework Navigation

Question 1 This page Question 2FlaggedQuestion 3Question 4Question 5Question 6

Return to courseFinish attempt ...

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• eBook
• Print

Managerial Accounting for Undergraduates, 2e

PLEASE READ: The reading links found below are for the convenience of students who have purchased the eBook. You do not have an active subscription to the eBook. eBooks subscriptions are sold separately. Click here to purchase access.

Launch Chapter 6 Cost-Volume-Profit Rel... Reading

Question 1

Not complete

Marked out of 6.00

Flag question

Question text

Least Squares Regression Analysis

Bogota Corporation has gathered data on its overhead activites and associated costs for the past 12 months. Josh Hopper, from the accounting department, has convinced management that overhead costs can be better estimated and controlled if the fixed and variable components of each overhead activity are known. One such activity is the purchasing department (receiving and reviewing purchase recquisitions, issuing purchase orders, and managing vendor relationships), which he believes is driven by the number of purchase orders issued. Twelve months of data have been gathered for the purchasing activity and are as follows:

Month	Purchase Orders Issued	Purchasing Cost
1	1,050	$23,738
2	750	16,788
3	1,550	35,113
4	1,250	27,263
5	1,350	27,463
6	1,150	27,988
7	1,650	34,388
8	1,450	29,213
9	1,750	38,663
10	950	21,938
11	1,250	25,688
12	1,500	34,200

a. Run a regression using Excel or a similar computer spreadsheet program. Provide the intercept, slope, and R² for the regression.

Round Intercept and Slope to two decimal places. Round R² to three decimal places.

Intercept $Answer

Mark 0.00 out of 1.00

Slope $Answer

Mark 0.00 out of 1.00

R² Answer

Mark 0.00 out of 1.00

b. Using the results from requirement a, prepare a cost formula for the purchasing activity.

Total cost = $Answer

Mark 0.00 out of 1.00

+ ($Answer

Mark 0.00 out of 1.00

x #purchase orders issued)

c. Using the formula from requirement b, what is the predicted cost of purchasing for a month in which 1,375 purchase orders are issued? (Note: Round your answer to the nearest dollar.)

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