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Unformatted text preview: ich we plot on a graph. We then manually fit a straight line to the data points, measure where is intersects the vertical axis of the graph (its fixed cost component), and compute its slope. Least Squares (or Linear Regression) Method. This is essentially the same as the scatter diagram method, except that we use a statistical technique to fit the points to a line rather than doing so manually. When this method is used, it is important to eliminate outliers so that the fit will reflect the general experience. This, of course, raises the question of what constitutes an outlier. Because of this complexity, many analysts prefer the scatter diagram method, reasoning that, when outliers are introduced, the precision of the least squares or linear regression method is compromised anyway. •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••...
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This document was uploaded on 03/30/2014.

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