250_Notes_6B

250_Notes_6B - b n = Variable cost per unit of driver n X n...

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ACCT 250 – ACCOUNTING FOR DECISION MAKING NOTES – CHAPTER 6B SPRING 2008 SUMMARY Here we’ll briefly examine multiple regression NOTES 1) Multiple regression a) What is it? Considers the impact of numerous X variables on the dependent variable As with simple regression, it is important that there be a plausible economic relationship between each driver and total cost, and a reasonable correlation between each driver and the total cost The output of a multiple regression looks much like that of a simple regression except that a coefficient is identified for each X variable So, we build a formula to calculate total cost in the following format y = a + (b 1 * X 1 ) + (b 2 * X 2 ) + (b n * X n ) Where: Y = Total cost a = Fixed (committed) costs
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Unformatted text preview: b n = Variable cost per unit of driver n X n = Number of units of driver n To analyze the effectiveness of the model, we examine the Adjusted R-square measure rather than R-square measure b) Performing multiple regression analysis The steps to perform a regression analysis are the same as for simple regression except as follows: o All of the X variables must be in contiguous columns o A scatter-graph is not prepared as there is too much data to interpret accurately; regression must be performed using the Data analysis toolpack o All of the X variables are highlighted together when inputting the X data Example Problem in Excel db9b77cae99c2aa7d898177a09dda1bb6b233902.doc Page 1 5/7/2009...
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