The controller for Dohini Manufacturing Company felt that the number of purchase orders alone did not explain the monthly purchasing cost. He knew that nonstandard orders (for example, one requiring an overseas supplier) took more time and effort. He collected data on the number of nonstandard orders for the past 12 months and added that information to the data on purchasing cost and total number of purchase orders. Month Purchasing Cost Number of Purchase Orders Number of Nonstandard Orders January $18,860 370 53 February 18,065 330 35 March 19,250 370 61 April 18,050 410 14 May 19,345 400 73 June 19,500 450 55 July 19,670 460 30 August 20,940 560 80 September 19,430 440 51 October 20,020 500 50 November 18,800 470 12 December 19,340 480 27 Multiple regression was run on the above data; the coefficients shown by the regression program are: Intercept 14,580 (rounded to the nearest dollar) X variable 1 8.81 (rounded to the nearest cent) X variable 2 20.37 (rounded to the nearest cent) Required:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Using Multiple Regression Results to Construct and Apply a Cost Formula

The controller for Dohini Manufacturing Company felt that the number of purchase orders alone did not explain the monthly purchasing cost. He knew that nonstandard orders (for example, one requiring an overseas supplier) took more time and effort. He collected data on the number of nonstandard orders for the past 12 months and added that information to the data on purchasing cost and total number of purchase orders.

Month	Purchasing Cost	Number of Purchase Orders	Number of Nonstandard Orders
January	$18,860	370	53
February	18,065	330	35
March	19,250	370	61
April	18,050	410	14
May	19,345	400	73
June	19,500	450	55
July	19,670	460	30
August	20,940	560	80
September	19,430	440	51
October	20,020	500	50
November	18,800	470	12
December	19,340	480	27