A mail order catalog business that sells personal computer supplies, software, and hardware maintains a centralized warehouse for the distribution of products ordered. Management is currently examining the process of distribution from the warehouse and has the business objective of determining the factors that affect warehouse distribution costs. Currently, a handling fee is added to the order, regardless of the amount of the order. Data that indicate the warehouse distribution costs and the number of orders received have been collected over the past 24 months and are stored in Warecost.
a. Assuming a linear relationship, use the least squares method to find the regression coefficients b0 and b1.
b. Predict the monthly warehouse distribution costs when the number of orders is 4,500.
c. Plot the residuals versus the time period.
d. Compute the Durbin Watson statistic. At the 0.05 level of significance, is there evidence of positive autocorrelation among the residuals?
e. Based on the results of (c) and (d), is there reason to question the validity of the model?
f. What conclusions can you reach concerning the factors that affect distribution costs?

  • CreatedJuly 16, 2015
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