After a few hours May’s computer is fixed. May uses the first 9 months of data and regression analysis to estimate the relationship between the quantity purchased and purchase costs of part #696. The regression line May obtains is as follows: y = $2,582.6 + 3.54XEvaluate the regression line using the criteria of economic plausibility, goodness of fit, and significance of the independent variable. Compare the regression equation to the equation based on the high-low method. Which is a better fit? Why? May Blackwell is the new manager of the materials storeroom for ClaytonManufacturing. May has been asked to estimate future monthly purchase costs for part #696, used in two ofClayton's products. May has purchase cost and quantity data for the past 9 months as follows:Quantity Purchased2,710 parts2,8104,1533,7562,9123,3873,6222,2983,562Cost of Purchase$12,675MonthJanuaryFebruary13,00017,65315,82513,12513,81415,30010,23314,950MarchAprilMayJuneJulyAugustSeptemberEstimated monthly purchases for this part based on expected demand of the two products for the rest of theyear are as follows:Purchase Quantity Expected3,340 parts3,7103,040MonthOctoberNovemberDecember

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Answered: May Blackwell is the new manager of the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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After a few hours May’s computer is fixed. May uses the first 9 months of data and regression analysis to estimate the relationship between the quantity purchased and purchase costs of part #696. The regression line May obtains is as follows: y = $2,582.6 + 3.54X

Evaluate the regression line using the criteria of economic plausibility, goodness of fit, and significance of the independent variable. Compare the regression equation to the equation based on the high-low method. Which is a better fit? Why?

May Blackwell is the new manager of the materials storeroom for Clayton
Manufacturing. May has been asked to estimate future monthly purchase costs for part #696, used in two of
Clayton's products. May has purchase cost and quantity data for the past 9 months as follows:
Quantity Purchased
2,710 parts
2,810
4,153
3,756
2,912
3,387
3,622
2,298
3,562
Cost of Purchase
$12,675
Month
January
February
13,000
17,653
15,825
13,125
13,814
15,300
10,233
14,950
March
April
May
June
July
August
September
Estimated monthly purchases for this part based on expected demand of the two products for the rest of the
year are as follows:
Purchase Quantity Expected
3,340 parts
3,710
3,040
Month
October
November
December

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