16_InClassActivity_RegressionAtNeidlessMarkop - ACC...

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ACC 333 (Farrell) Class 16 Fall 2011 Page 1 of 5 In-Class Activity – Using Regression Analysis at Neidless Markop Neidless Markop operates a chain of ten retail department stores. Each department store makes its own purchasing decisions. Barry Lee, assistant to the president of Neidless Markop, is interested in better understanding the drivers of purchasing department costs at each store. For many years, Neidless Markop has allocated purchasing department costs to products on the basis of dollar value of merchandise purchased. Typically, an item costing $100 has been allocated ten times as much purchasing department overhead cost as an item costing $10. Lee recently attended a seminar titled “Cost Drivers in the Retail Industry.” In a presentation at the seminar, Couture Fabrics, a leading competitor with 30 retail outlets, reported that the number of purchase orders and the number of suppliers are the two most important cost drivers of purchasing department costs. The dollar value of merchandise purchased on each purchase order was reported to be not a significant cost driver by Couture Fabrics. Lee interviewed several members of the purchasing department at the Neidless Markop store in Miami. These people told Lee that they believed the Couture Fabrics conclusions also applied to their purchasing department. Lee collected data for the most recent year for the ten retail department stores of Neidless Markop. Lee used regression analysis to examine whether one or more of the three variables (dollar value, number of purchase orders, and number of suppliers) are cost drivers of purchasing department costs. Summary results for these
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This note was uploaded on 03/19/2012 for the course ACCACC 333 taught by Professor Anne during the Fall '11 term at Miami University.

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16_InClassActivity_RegressionAtNeidlessMarkop - ACC...

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