Concept explainers
The Lockit Company manufactures door knobs for residential homes and apartments. Lockit is considering the use of simple (single-driver) and multiple regression analyses to
Larry Husky, the controller of Lockit, has considered many possible independent variables and equations to predict sales and has narrowed his choices to four equations. Husky used annual observations from 20 prior years to estimate each of the four equations.
Following are definitions of the variables used in the four equations and a statistical summary of these equations:
Required:
- 1. Write Equations 2 and 4 in the form Y = a + bx.
- 2. If actual sales are $1,500,000 in the current year, what would be the forecasted sales for Lockit in the coming year?
- 3. Explain why Larry Husky might prefer Equation 3 to Equation 2.
- 4. Explain the advantages and disadvantages of using Equation 4 to forecast sales.
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Cornerstones of Cost Management (Cornerstones Series)
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