Estimating Monthly Purchase Costs Using Regression Analysis

Month Cost of Purchase January 12,675 February 13,000 March 17,653 April 15,825 May 13,125 June 13,814 July 15,300 August 10,233 September 14,950 Month Purchase Quantity Expecte October 3,340 November 3,710 December 3,040 Required 10-26 High-Low, Regression. May Bla Manufacturing. May has been asked to e products. May has purchase cost and qua as follows: 1. The computer in May's office is down, future purchase cost for part #696. May equation. What equation does she get? 2. Using the equation from requirement 1 of the year 3. After a few hours May's computer is fix the relationship between the quantity pu as follows:

Evaluate the regression line using the cri independent variable . Compare the re better fit ? Why? 4. Use the regression results to calculate Compare the expected purchase cos requirement 2. Comment on your results

Quantity Purchased 2,710 2,810 4,153 3,756 2,912 3,387 3,622 2,298 3,562 ed parts y = $2,582.6 + ackwell is the new man estimate future monthly antity data for the past and May has been ask grabs a calculator and 1, calculate the future xed. May uses the first urchased and purchase

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iteria of economic pla egression equation to t e the expected purchas sts to the expected pur s.

parts + 3.54X nager of the materials storeroom for Clayton y purchase costs for part #696, used in two of Clayton's t 9 months as follows: ked to immediately provide an equation to estimate the d uses the high-low method to estimate a cost expected purchase costs for each of the last 3 months t 9 months of data and regression analysis to estimate e costs of part #696. The regression line May obtains is

ausibility , goodness of fit , and significance of the the equation based on the high-low method. Which is a se costs for October, November, and December. rchase costs calculated using the high-low method in

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Month January 942 974 1,710 February 1,008 776 2,655 March 1,218 686 2,705 April 1,380 694 4,220 May 1,484 588 4,660 June 1,548 422 4,455 July 1,568 352 4,435 August 1,972 420 4,990 September 1,190 564 2,990 October 1,302 788 2,610 November 962 762 2,240 December 772 1,028 1,490 Required 1. Conduct a regression using the monthly data of ope Regression: Operating Costs = a + (b × Number of fre Variable Coefficient Constant 445.76 Independent variable: No. of freight miles 0.26 10-28 Interpreting regression results. Spirit Freigh provinces of Canada. Reese Brown, a financial analyst for budgeting purposes. Transportation costs at Spirit a maintenance costs (primarily overhaul of vehicles). Brown gathers monthly data on each type of cost, as w The data collected are shown below (all in thousands): Operating Costs Maintenanc e Costs Freight Miles

r squared = 0.86; Durbin-Watson statistic = 2.18 Regression: Maintenance Costs = a + (b × Number of Variable Coefficient Constant 1170.57 Independent variable: No. of freight miles -0.15 r squared = 0.77; Durbin-Watson statistic = 1.94 6. Provide a reasoned explanation for the observed sig alternative data or alternative regression specification

erating costs on freigh eight miles) Std. Error t-Value 112.97 3.95 0.03 7.83 htways is a leader in t at Spirit Freightways, are of two types: (a) o well as the total freigh :

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freight miles) Std. Error t-Value 91.07 12.85 0.03 -5.83 gn on the cost driver v ns would you like to us

ht miles. You should obtain the following result: transporting agricultural products in the western , is studying the behaviour of transportation costs operating costs (such as labour and fuel) and (b) ht miles traveled by Spirit vehicles in each month.

variable in the maintenance cost regression. What se to better capture the above relationship?

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Variable Cost Rework cost per hour 79 Repair costs Customer support cost per hour 35 Transportation cost per load 350 Warranty repair cost per hour 89 Required 1. Should SpeedPrint change to the new compone 3. What other factors should managers at SpeedP 10-33 Quality improvement, relevant costs, technology printing presses each year. The variab SpeedPrint's current presses have a quality probl suggest changing a key component in each pres year, however, SpeedPrint expects that with the (1) save 14,000 hours of rework, (2) save 850 hours of customer support, (3) move 225 fewer loads, (4) save 8,000 hours of warranty repairs, and (5) sell an additional 140 printing presses, for a to SpeedPrint believes that even as it improves qua SpeedPrint uses a 1-year time horizon for this de 2. Suppose the estimate of 140 additional printin printing presses that SpeedPrint needs to sell to j

Fixed Cost Total Cost 115 194 55 90 115 465 150 239 ent? Show your calculation Print consider when makin , relevant revenues. Spe ble and fixed costs of rewo lem that causes variations ss . The new component w new component it will otal contribution margin o ality, it will not be able to s ecision because it plans to ng presses sold is uncertain justify adopting the new c

ns ng their decision about changing to a new component? eedPrint manufactures and sales 18,000 high- ork and repair are as follows: s in the shade of some colours. Its engineers will cost $70 more than the old one. In the next of $1,680,000. save any of the fixed costs of rework or repair. introduce a new press at the end of the year. n. What is the minimum number of additional component?

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Chapter 10 Problems - clean version

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