You have recently been hired as a cost accountant at Travenol Laboratories. The controller is an "old school" accountant and has heard that you recently graduated with a degree in accounting. One day he summons you to his office to assign you a task. He says, "I understand that recently educated accountants are using a variety of statistical tools to determine causality between costs and their respective drivers. We have been using direct labor hours as our cost driver for our manufacturing overhead costs for as long as I have been here. In the last few years our production processes have become more automated and I am not sure whether direct labor hours is the appropriate allocation basis for our manufacturing overhead costs. I would like you to use some of those statistical tools to determine whether there is a more appropriate cost driver."

You leave his office recognizing that this is a tremendous career opportunity. If you can convince your boss that you can use statistical analysis to determine the best cost driver, you will have established yourself in the department as a knowledgeable professional. It is good fortune that one of your projects in your cost class dealt specifically with this type of analysis.

Year	MOH	DLH	DLS	MH	DMS
2000	948,768	7,595	113,932	19,650	149,712
2001	833,153	14,235	173,518	12,767	111,754
2002	753,039	14,997	184,961	12,002	126,155
2003	799,757	12,901	153,511	15,420	140,550
2004	972,624	8,555	168,322	11,107	167,648
2005	967,537	10,565	198,476	13,759	143,981
2006	945,057	12,878	153,169	19,230	110,323
2007	750,112	8,888	93,322	12,319	115,301
2008	884,112	11,287	169,311	13,489	158,897
2009	923,244	10,127	111,900	14,603	167,418
2010	929,320	11,690	215,349	12,126	120,126
2011	785,210	7,707	75,606	11,334	121,555
2012	862,449	12,182	142,734	17,987	101,168
2013	865,873	5,095	36,429	18,015	156,535
2014	804,287	11,464	211,962	15,504	152,855
2015	797,726	9,989	149,840	12,472	148,269
MOH=Manufacturing Overhead					MH=Machine Hours
DLH=Direct Labor Hours					DM$=Direct Material Dollars
DL$=Direct Labor Dollars

Requirement:

1. Perform a regression on DLH, DL$, MH and DM$ and comment on the following for each;
a. The equation
b. Goodness of fit
c. Significance of independent variables
d. Any autocorrelation
2. What would you recommend and why?