Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 16

Carter Dry Cleaning has developed two regression analyses for cost estimation. The accounting manager has presented statistical measures for both of these regressions. Regression A has an R-squared value of .53 and a t-value of 1.08 and Regression B has an R-squared of .89 and a t-value of 2.17. What do these statistical measures indicate about the regressions? Which regression should Carter Dry Cleaning use for cost estimation?

Step 1 of 6

Cost estimates is necessary for the management and their by various decision are taken by the organization. For the more accurate result, in addition to the cost estimate, regression analysis are made to measures the reliability and the precision. Reliability is one on which management made faith that is it indicates whether regression reflects actual with the variables and on the other hand precision means accuracy of the estimates which is made on analysis from the bases of regression.