Question 2 - Estimating Cost Behaviour - 20 marks Jazzy Wear operates a chain of 10 retail department stores in different locations geographically. Each store makes its own purchasing decisions. Gary Grow, assistant to the President of Jazzy Wear, is interested in better understanding the drivers of purchasing department costs. Historically, the company has allocated this cost to products on the basis of the dollar value of merchandise purchased (DVMP). For example, a $100 item was allocated 10 times as many overhead costs associated with the purchasing department as a $10 item. Gary recently participated in a webinar focusing on cost drivers in the retail industry and was impressed by the use of activity-based costing and the research which purported that the number of purchase orders (No. of POs) and the number of suppliers (No. of Ss) were the two most important cost drivers of purchasing department costs. Gary then used this information and interviewed all members of the purchasing department at Jazzy Wear Store Location 4 and the opinions gathered from the staff revealed that these two cost drivers were applicable to Jazzy Wear's purchasing department. Gary collects the following data for the most recent year for Jazzy Wear's 10 retail denartment stores. Part A Gary decides to use simple regression analysis to examine whether one or more of the three variables are cost drivers of purchasing department costs. Required: (i) Using Microsoft Excel Data Analysis ToolPak, present summary results for the following regression models: a. Regression 1: PDC=a+(bDVMP) b. Regression 2: PDC=a+(bNo. of POs) c. Regression 3: PDC=a+(bNo. of Ss) Page 4 of 6 (ii) Using the summary results from (i) above, compare and evaluate the three simple regression models estimated by Gary. Also present a scatter plot and line of best fit for each one. More so, use the format employed in your text, specifically Exhibit 10-18, to evaluate the information. (iii) Which of these cost drivers would you recommend in designing an ABC system