1. You are the manager of a department within a corporation. You are trying to get...
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1. You are the manager of a department within a corporation. You are trying to get a handle on the costs associated with a product or service that the department produces. You need this information to predict what the cost of producing this product or service will likely be in the future; what costs are fixed, and thus cannot be changed (at least not in the short-term); what costs are variable (and thus might be changed); and what the effect on profitability will be with an increase or decrease in sales of the product or service that your department produces. You ask your company's resident statistics guru to help you out. She or he arrives in your office one day with something called a "least-squares regression analysis." The analysis lists three things: "slope," "intercept, "and "RSQ." What do each of these things tell you? How much faith should you have in the numbers presented to you in the analysis? What would indicate to you whether this analysis or one done later best explains the relationship between fixed and variable costs, and thus predicts costs in the future? 1. You are the manager of a department within a corporation. You are trying to get a handle on the costs associated with a product or service that the department produces. You need this information to predict what the cost of producing this product or service will likely be in the future; what costs are fixed, and thus cannot be changed (at least not in the short-term); what costs are variable (and thus might be changed); and what the effect on profitability will be with an increase or decrease in sales of the product or service that your department produces. You ask your company's resident statistics guru to help you out. She or he arrives in your office one day with something called a "least-squares regression analysis." The analysis lists three things: "slope," "intercept, "and "RSQ." What do each of these things tell you? How much faith should you have in the numbers presented to you in the analysis? What would indicate to you whether this analysis or one done later best explains the relationship between fixed and variable costs, and thus predicts costs in the future?
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1 Slope The slope tells you the relationship between the independent variable and the dependent vari... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0071051606
8th Canadian Edition
Authors: Stephen A. Ross, Randolph W. Westerfield
Posted Date:
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