costacctg13_sm_ch10

G engineers may requisit ion materials and parts in

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Unformatted text preview: the individual variables. This frequently shows up in reduced t­values for the independent variables in the mult iple regressio n relat ive to their t­values in the simple regressio n: t­value from Simple Regressions in Problem 10­39 2.43 2.28 Variables Regression 4: # of POs # of Ss Regression 5: # of POs # of Ss MP$ t­value in Multiple Regression 2.14 2.00 1.95 1.84 –0.07 2.43 2.28 0.84 The decline in the t­values in the mult iple regressions is consistent with so me (but not very high) collinearit y amo ng the independent variables. Pairwise correlat ions between the independent variables are: Correlation 0.29 0.27 0.34 # of POs ¸ # of Ss # of POs ¸ MP$ # of Ss ¸ MP$ There is no evidence of difficult ies due to mult icollinearit y in Regressio ns 4 and 5. 5. are Decisio ns in which the regressio n results in Problems 10­40 and 10­41 could be usefu l Cost management decisions: Fashio n Flair could restructure relat ionships wit h the suppliers so that fewer separate purchase orders are made. Alternat ively, it ma y aggressively reduce the number of exist ing suppliers. Purchasing policy decisions: Fashio n Flair could set up an internal charge system for individua l retail departments within each store. Separate charges to each department could be made for each purchase order and each new supplier added to the exist ing ones. These internal charges would signal to each department ways in which their own decis io ns affect the total costs of Fashio n Flair. Accounting system design decisions: Fashio n Flair may want to discontinue allocat ing purchasing department costs on the basis o f the do llar value of merchandise purchased. Allocat ion bases better capturing cause­and­effect relat ions at Fashion Flair are the number o f purchase orders and the number of suppliers. 10­39 10­42 (40 min.) High­low method, alternative regression functions, accrual accounting adjustments, ethics. 1. Solution Exhibit 10­42A presents the two data plots. The plot of engineering support reported costs and machine­hours shows two separate groups of data, each of which may be approximated by a separate cost funct ion. T...
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