Deriving Cost Drivers for Activity$-$Based Costing $($Regression Analysis$)$

Apply the same steps in Lab $3\mathrm{.}5$ to Lab $3\mathrm{.}5$ Alt Data.xlsx to perform cost driver analysis for the service call center at Thrustmaster. Thrustmaster is a fictitious

company that sells game controllers, joysticks, steering wheels for PCs$,$ and XBOX, Nintendo, and PlayStation consoles.

Thrustmaster is trying to understand its overhead allocation for the call center that supports its sales. It believes that by understanding the overhead costs and

their respective cost drivers, the company will be in a better position to allocate overhead to the various products that require more service. Management is

considering these four potential cost drivers:

Customer call minutes

Customer complaints

Average workers

Company sales

Required

Using regression analysis and choosing from several potential cost drivers, derive the cost drivers that are significant predictors of overall overhead costs

and can be used to help allocate overhead. Set alpha to $5\%,$ or $0\mathrm{.}05.$

Derive the formula for allocating overhead $($the regression line equation$).$

Compare estimated overhead per delivery to actual overhead per delivery using a scatterplot.

Specify the Question

How can we use regression analysis to find cost drivers and derive a formula for allocating overhead?