Suppose that number of purchase orders is being considered as a potential cost driver for the...

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Suppose that number of purchase orders is being considered as a potential cost driver for the Purchasing activity cost pool. When you plot purchasing activity costs on the y-axis against number of purchase orders on the x-axis you get this plot: wake ** ♦ Residuals When you regress purchasing activity costs on number of purchase orders, you get an adequate adjusted R-squared and a t-statistic of 2.25 for the coefficient on purchase orders. The residual plot from the regression looks like this (X= Number of purchase orders): X Variable 1 Residual Plot 80 . 8 20 X Variable 1 Given this information, should you use this regression model to predict purchasing activity costs? Why or why not? Suppose that number of purchase orders is being considered as a potential cost driver for the Purchasing activity cost pool. When you plot purchasing activity costs on the y-axis against number of purchase orders on the x-axis you get this plot: wake ** ♦ Residuals When you regress purchasing activity costs on number of purchase orders, you get an adequate adjusted R-squared and a t-statistic of 2.25 for the coefficient on purchase orders. The residual plot from the regression looks like this (X= Number of purchase orders): X Variable 1 Residual Plot 80 . 8 20 X Variable 1 Given this information, should you use this regression model to predict purchasing activity costs? Why or why not?

Answer rating: 100% (QA)

The provided images include a scatter plot of purchasing activity costs versus the number of purchase orders and a residual plot from a simple linear regression analysis with the number of purchase or... View the full answer