Fixit Company recently entered the competitive home improvement industry. Fixit’s accountant, Woody Splinters, wants to use various types of data analytics to understand and improve the company’s financial performance.

Required:
Given the nature and competitiveness of the industry in which Fixit operates, explain how Woody could use the method of least squares (regression) effectively as a refer to Exhibit 2-2 shown below:

1. Diagnostic data analytic tool
2. Predictive data analytic tool

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Data Analytic Question Answered Management Accounting Analysis Example Type Descriptive What is happening? Diagnostic Predictive Prescriptive Create a profit and loss analysis of current products (games, virtual reality headsets, controllers) based on historical financial performance data. Why is it happening? Conduct an analysis that identifies the drivers of customers' most valued particular product preferences (features, platforms, consoles, multi- player capabilities). What is likely to happen? Forecast the financial impact (in terms of lost revenue) from the risk that competitors introduce new games with innovative and popular features. What do I need to do? Build a model that informs employees about specific choices to make across the value chain (from game design to distribution to marketing to aftermarket customer interfaces) to optimize profitability.