# Scattergraph & Least Squares Regression Question

a. Examine the scattergraphs provided. (Scattergaph is second attachment) Comment on what the scattergraphs reveal about:

1) The relationship between # units produced and overhead cost.

2) The relationship between # of workdays and overhead cost.

b. Examine the Least Squares Regression results provided. Which of the activities is the better predictor of overhead costs Explain your answer. (LSR is second attachment)

MBA 621 Pine Burr Manufacturing – Evaluating Alternative Allocation Bases Part a: Scattergraph on # Units Produced Part a: Scattergraph on # Workdays Overhead Costs Overhead Costs $5,000 $5,000 $4,500 $4,500 $4,000 $4,000 $3,500 $3,500 $3,000 $3,000 $2,500 $2,500 $2,000 $2,000 $1,500 $1,500 $1,000 $1,000 $500 $500 $- $- 20 40 60 80 100 120 140 – 5 10 15 20 25 Comments: Comments: Part b: Least Squares Regression results on # of units produced. Part b: Least Squares Regression results on # of workdays. Intercept Slope R2 2,803.97 10.23 0.14 Intercept Slope R2 Which of the activities is the better predictor of overhead costs? Explain your answer.

60.86 179.11 0.96 30 MBA 621 Pine Burr Manufacturing – Evaluating Alternative Allocation Bases Part a: Scattergraph on # Units Produced Part a: Scattergraph on # Workdays Overhead Costs Overhead Costs $5,000 $5,000 $4,500 $4,500 $4,000 $4,000 $3,500 $3,500 $3,000 $3,000 $2,500 $2,500 $2,000 $2,000 $1,500 $1,500 $1,000 $1,000 $500 $500 $- $- 20 40 60 80 100 120 140 – 5 10 15 20 25 Comments: Comments: Part b: Least Squares Regression results on # of units produced. Part b: Least Squares Regression results on # of workdays. Intercept Slope R2 2,803.97 10.23 0.14 Intercept Slope R2 Which of the activities is the better predictor of overhead costs? Explain your answer.

60.86 179.11 0.96 30 MBA 621 Pine Burr Manufacturing – Evaluating Alternative Allocation Bases Pine Burr Manufacturing makes a key component part for street cleaning machines. The business is seasonal with highest sales volume occurring during late summer. The company has been analyzing its overhead accounts to isolate fixed and variable components for planning purposes. The table below shows cost and activity data for the last nine months: January February march April May June July August September Totals # of units produced 120 114 106 80 74 113 81 76 132 896 # of workdays 22 20 24 21 25 23 17 15 22 189 Total Overhead Cost $ 4,006 $ 3,815 $ 4,290 $ 3,638 $ 4,633 $ 4,219 $ 2,929 $ 2,877 $ 3,992 $ 34,399 REQUIRED: a. Examine the scattergraphs provided. Comment on what the scattergraphs reveal about: 1) The relationship between # units produced and overhead cost. 2) The relationship between # of workdays and overhead cost. b. Examine the Least Squares Regression results provided. Which of the activities is the better predictor of overhead costs Explain your answer.

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