Assessment 2 Part 1: Interpretation of Regression Results

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Assessment 2 Part 1

Assessment 2 Part 1: Interpretation of Regression Results
Assessment 2 Part 1: Interpretation of Regression Results
Assessment 2 Part 1: Interpretation of Regression Results
Scenario
Your company provides a variety of delivery services. Management wants to know the volume of a particular delivery that would generate $11,000 per month in operating profits before taxes. The company charges $22 per delivery. The controller’s office has estimated overhead costs at $9,900 per month for fixed costs and $12 per delivery for variable costs. You believe that the company should use regression analysis. Your analysis shows the results to be: Monthly overhead=$26,501+$10.70 per Your estimate was based on the following data:
Month Overhead Costs Number of Deliveries
  1 $ 159,630.00 12510
  2   183,990 15060
  3   142,860 11430
  4   194,430 15450
  5   151,890 12180
  6   150,120 11970
  7   192,600 15660
  8   154,080 12630
  9   141,030 11250
10   184,800 15300
11   203,490 12780
12   183,120 14580
13   180,630 14730
REQUIRED
The company controller is somewhat surprised that your cost estimates are so different from the controller’s. You have been asked to recheck your work and see if you can figure out the difference between your results and the controller’s results.
1. Analyze the data and your results. Explain your reasons for supporting or rejecting your cost equation. Show all calculations.
2. Write a report that informs management about the correct volume that will generate $11,000 per month in operating profits before taxes.

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