a. What does the r2 indicate when used in regression analysis?

b. Which of the above is the better cost driver? List two reasons why to support your choice of best cost driver.

c. Using the equation you chose in part b., estimate the total cost for the upcoming period. The number of suppliers is expected to be 35 and 75 parts are expected to be used.

d. Give an example of how more accurate cost estimation supports management decision-making in an organization.
 

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22. (10 points) Jasmine Inc. is working to more accurately estimate Purchasing Department costs. Jasmine's management accountant has identified two cost drivers (number of suppliers and number of parts per product) to evaluate Purchasing Department costs. The most recent regressions results for each cost driver are as follows: Suppliers: Standard Error $299.75 $3.12 Variable Coefficient $300.98 t-Value Constant 1.31 Independent Variable $10.31 r? = 0.52 3.30 Number of parts: Variable Constant Coefficient $242.90 Standard Error $75.04 $2.00 t-Value 3.24 Independent Variable $5.60 r2 = 0.73 2.80 22. (10 points) Jasmine Inc. is working to more accurately estimate Purchasing Department costs. Jasmine's management accountant has identified two cost drivers (number of suppliers and number of parts per product) to evaluate Purchasing Department costs. The most recent regressions results for each cost driver are as follows: Suppliers: Standard Error $299.75 $3.12 Variable Coefficient $300.98 t-Value Constant 1.31 Independent Variable $10.31 r? = 0.52 3.30 Number of parts: Variable Constant Coefficient $242.90 Standard Error $75.04 $2.00 t-Value 3.24 Independent Variable $5.60 r2 = 0.73 2.80

Answer rating: 100% (QA)

Solution to a The value of R 2 indicates the proportion of variation explained by ... View the full answer