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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 27
Method of Least Squares
DeMarco Company is developing a cost formula for its packing activity. Discussion with the workers in the Packing Department has revealed that packing costs are associated with the number of customer orders, the size of the orders, and the relative fragility of the items (more fragile items must be specially wrapped in bubble wrap and Styrofoam). Data for the past 20 months have been gathered:
Required:
1. Using the method of least squares, run a regression using the number of orders as the independent variable.
2. Run a multiple regression using three independent variables: the number of orders, the weight of orders, and the number of fragile items. Which regression equation is better? Why?
3. Predict the total packing cost for 25,000 orders, weighing 40,000 pounds, with 4,000 fragile items. Prepare a 99 percent confidence interval for this estimate of total packing cost.
4. How much would the cost estimated for Requirement 3 change if the 25,000 orders weighed 40,000 pounds, but only 2,000 were fragile items?
DeMarco Company is developing a cost formula for its packing activity. Discussion with the workers in the Packing Department has revealed that packing costs are associated with the number of customer orders, the size of the orders, and the relative fragility of the items (more fragile items must be specially wrapped in bubble wrap and Styrofoam). Data for the past 20 months have been gathered:
Required:
1. Using the method of least squares, run a regression using the number of orders as the independent variable.
2. Run a multiple regression using three independent variables: the number of orders, the weight of orders, and the number of fragile items. Which regression equation is better? Why?
3. Predict the total packing cost for 25,000 orders, weighing 40,000 pounds, with 4,000 fragile items. Prepare a 99 percent confidence interval for this estimate of total packing cost.
4. How much would the cost estimated for Requirement 3 change if the 25,000 orders weighed 40,000 pounds, but only 2,000 were fragile items?
Explanation
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Verified
1. The regression of the data of packing...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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