Question

Regression Analysis
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 DL$ MH DM$ 2000 800,748 8,988 174,816 11,580 150,457 2001 964,305 7,053 105,789 14,274 124,180 2002 959,859 14,329 214,929 12,395 138,785 2003 841,455 9,749 146,230 14,121 143,074 2004 848,457 14,959 224,381 19,522 166,752 2005 934,087 12,971 234,558 13,996 129,963 2006 938,737 10,180 112,704 10,029 127,207 2007 801,328 13,488 202,319 15,120 126,507 2008 968,839 8,298 84,470 15,842 144,981 2009 865,098 10,562 158,428 11,552 163,323 2010 760,935 12,771 191,558 17,836 129,906 2011 817,208 8,694 170,409 13,964 119,208 2012 778,955 9,549 183,236 17,727 108,481 2013 976,866 7,575 73,631 17,699 131,462 2014 768,552 12,156 182,339 16,711 133,599 2015 934,020 5,221 38,314 11,585 117,617 MOH=Manufacturing Overhead MH=Machine Hours DLH=Direct Labor Hours DM$=Direct Material Dollars DL$=Direct Labor Dollars Required: 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?

Answer 1

ANSWER:-

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