Following are the results from two different simple regression analyses estimati
ID: 3042621 • Letter: F
Question
Following are the results from two different simple regression analyses estimating the costs of the marketing department using number of sales persons and number of units sold as cost drivers.
Variable
Coefficient
t-statistic
p-value
Intercept
500.75
4.05
0.03
Number of sales persons
20.50
6.10
0.004
Adjusted R-square = 0.80
Variable
Coefficient
t-statistic
p-value
Intercept
700.23
0.98
0.30
Number of units sold
120.33
3.66
0.05
Adjusted R-square = 0.49
a. Which independent variable explains more of the variation in marketing department costs?
b. Choose the most appropriate cost driver and write the cost function.
c. What are the examples of uncertainties that could affect the accuracy of the cost function in estimating the cost for the next month.
Variable
Coefficient
t-statistic
p-value
Intercept
500.75
4.05
0.03
Number of sales persons
20.50
6.10
0.004
Adjusted R-square = 0.80
Explanation / Answer
a)
Number of sales persons
as R^2 = 0.80 > 0.49 (for units sold)
b)
cost function = 500.75 + 20.50 * Number of sales persons