Which is the better model? Why?

1. Use the DLH Model for this question: If the value is on the Excel output no formula is needed

1. Write the regression equation (i.e. what are the values of b₀ and b₁)
2. Interpret the meaning of the slope b₁ in this problem.
3. Estimate the average overhead when DLH = 1,300 hours.
4. Determine the value of the coefficient of determination (r²) and interpret its meaning.
5. Find the standard error of the estimate.
6. At the 1% level of significance is there a relationship between Overhead and your X variable?
7. Set up a 95% confidence interval of the slope β₁.
8. Set up a 95% confidence interval for the actual overhead in one month given that DLH = 1,300 hrs.

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A. Simple Linear Regression The Baker Company wants to develop a budget to predict how overhead costs vary with activity levels. Management is trying to decide whether direct labor hours (DLH) or the number of units produced (Units) is the better measure of activity for the firm. Monthly data for the past 24 months appears below (and in the posted file EXAM3DATA.xlsx). Baker Company overhead costs Month 1 2 CS5 WN | 3 4 6 7 8 9 10 11 12 DLH 1,304 1,397 1,465 1,232 1,487 1,223 1,238 1,406 1,179 1,272 1,344 1,324 Units Overhead 111 $30,800 114 $32,900 133 129 147 130 122 DLH Model 119 105 125 126 145 $33,800 $29,900 $34,200 $28,700 $29,600 $31,600 $28,000 $30,300 $31,600 $31,800 Month 13 14 15 16 17 18 19 20 21 22 23 24 DLH 1,301 1,438 1,194 1,355 1,149 1,244 1,158 1,418 1,117 1,340 1,334 1,387 Units Overhead 138 $30,500 123 $34,000 124 $29,000 144 $32,600 120 $28,200 120 $30,000 106 $28,800 150 121 116 129 150 Hand in this exam along with the needed computer backup work. If anyone submits a copy everyone with that submission will get a zero on the exam. Make sure your name is in the Excel sheets. 1. Use regression analysis to determine which measure, DLH or Units should be used for the budget. Determine if each model is a valid use of regression. (Straight line?, relationship?, assumptions?) (ie validate each of the two models.). $33,100 $26,700 $31,200 $30,900 $32,700 Units Model A. Simple Linear Regression The Baker Company wants to develop a budget to predict how overhead costs vary with activity levels. Management is trying to decide whether direct labor hours (DLH) or the number of units produced (Units) is the better measure of activity for the firm. Monthly data for the past 24 months appears below (and in the posted file EXAM3DATA.xlsx). Baker Company overhead costs Month 1 2 CS5 WN | 3 4 6 7 8 9 10 11 12 DLH 1,304 1,397 1,465 1,232 1,487 1,223 1,238 1,406 1,179 1,272 1,344 1,324 Units Overhead 111 $30,800 114 $32,900 133 129 147 130 122 DLH Model 119 105 125 126 145 $33,800 $29,900 $34,200 $28,700 $29,600 $31,600 $28,000 $30,300 $31,600 $31,800 Month 13 14 15 16 17 18 19 20 21 22 23 24 DLH 1,301 1,438 1,194 1,355 1,149 1,244 1,158 1,418 1,117 1,340 1,334 1,387 Units Overhead 138 $30,500 123 $34,000 124 $29,000 144 $32,600 120 $28,200 120 $30,000 106 $28,800 150 121 116 129 150 Hand in this exam along with the needed computer backup work. If anyone submits a copy everyone with that submission will get a zero on the exam. Make sure your name is in the Excel sheets. 1. Use regression analysis to determine which measure, DLH or Units should be used for the budget. Determine if each model is a valid use of regression. (Straight line?, relationship?, assumptions?) (ie validate each of the two models.). $33,100 $26,700 $31,200 $30,900 $32,700 Units Model

Answer rating: 100% (QA)

To determine which measure DLH or Units should be used for the budget we can perform regression analysis on both models and evaluate their validity Lets start with the DLH model DLH Model Step 1 Data ... View the full answer