Plot the purchase department cost vs$.$ each cost driver $($include these at the end of the memo as an attachment, one graph per page$).$

b$.$ Analyze the data for potential problems, correct data problems if necessary, and report any changes made.

c$.$ Use regression analysis to develop cost models for all potential cost drivers.

d$.$ Identify the best model, and explain why.

e$.$ Explain what the model means from an economic

perspective.

$2.$ Use the model to make two recommendations to the CWWR management team for improving the efficiency of purchasing operations.

a$.$ Be specific with details of the recommendations.

b$.$ Estimate the cost savings from the implementation of your recommendations.

c$.$ Consider secondary implications, quantitative and$/$or qualitative.

d$.$ Indicate how these changes $($recommendations$)$ should be implemented.

DISCUSSION QUESTIONS

At the next team meeting, the agenda will cover the contents of your memo as well as the following discussion items. Please be prepared to discuss them.

$1.$ What cost drivers are useful for predicting purchasing department costs? What is the recommended model? What does it mean? How can this model be used to reduce costs?

$2.$ Does CWWR use a centralized or decentralized purchasing strategy? Why would the company use this strategy? Under what circumstances would a centralized strategy be more valuable? Under what circumstances would a decentralized strategy be more valuable?

$3.$ You developed recommendations, which essentially are changes to human behavior. Is change in an organization easy? How can human behaviors be changed in a management setting?