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ACC327 Homework - Regression Problem #1

This document provides data on monthly utility costs, labor hours, and machine hours for Bogus Corporation. The controller has asked analysts to analyze the data and select the best cost driver between labor hours and machine hours to explain utility costs. Analysts are to prepare scatter plots of each potential cost driver against utility costs, add trendlines, and assess whether a linear relationship appears reasonable and how good of a fit each cost driver is based on the plots.

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Patrick Ulrich
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110 views1 page

ACC327 Homework - Regression Problem #1

This document provides data on monthly utility costs, labor hours, and machine hours for Bogus Corporation. The controller has asked analysts to analyze the data and select the best cost driver between labor hours and machine hours to explain utility costs. Analysts are to prepare scatter plots of each potential cost driver against utility costs, add trendlines, and assess whether a linear relationship appears reasonable and how good of a fit each cost driver is based on the plots.

Uploaded by

Patrick Ulrich
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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ACC327

Fall 2007
Regression Problem #1

Due: 09/05/2007

The management of Bogus Corporation has identified two possible cost drivers (labor
hours and machine hours) for utility cost. The controller has asked you to analyze the
data and select the best cost driver from the two candidates.

Data

Month Utility Cost Labor Hours Machine Hours


Jan $ 2,527 4,150 2,500
Feb 2,515 4,000 2,375
Mar 2,654 4,360 2,600
Apr 2,593 4,200 2,450
May 2,455 4,050 2,525
June 2,509 4,100 2,410
July 2,557 4,275 2,720
Aug 2,588 4,250 2,525
Sept 2,540 4,050 2,350
Oct 2,707 4,500 2,610
Nov 2,731 4,600 2,700
Dec 2,697 4,375 2,675
Total 31,073 50,910 30,440

Required:
For each possible cost driver (Labor Hours and Machine Hours) use Excel to:
1 Prepare a scatter plot against utility cost. Be sure to label each axis.
2 Add a trend-line to the plot.
3 Does the plot indicate that the assumption of a linear relationship between the
possible cost driver and Utility Cost is reasonable? Explain.

4 Based on the plot, would you expect that the cost driver is a "good fit"?
Explain.
5 Print your plots and answers to the questiojns on separate pages in Excel.

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