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4m Cost Accounting

4m Cost Accounting. Stine & Foster Chapter 6. Motivation. If the manufacturer can find a variable that is highly correlated with the final cost, how can it use this knowledge to improve the process that is used to quote a price ?. Method.

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4m Cost Accounting

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  1. 4m Cost Accounting Stine & Foster Chapter 6

  2. Motivation • If the manufacturer can find a variable that is highly correlated with the final cost, how can it use this knowledge to improve the process that is used to quote a price?

  3. Method • What variable is the response? What are the possible explanatory variables? • How can the manufacturer use the correlation to identify variables that are related to this response? • Explain why it is important to consider scatterplots as well.

  4. Mechanics • Obtain all of the scatterplots needed to understand the relationship between the response and the three explanatory variables. Briefly describe the association in each. • Obtain all of the correlations among these four variables. (These are most often displayed in a correlation matrix.) Which explanatory variable is highly correlated with the response? • Check the conditions for the correlation of the response with the three predictors. To the scatterplots suggest any problems that make these three correlations appear unreliable? • Adjust for any problems noted in part (g) and recompute the correlations.

  5. Summary Statistics

  6. Production Cost Histogram

  7. Production Cost Boxplot

  8. Material Cost Histogram

  9. Material Cost Boxplot

  10. Labor Hours Histogram

  11. Labor Hours Boxplot

  12. Milling Operations Histogram

  13. Milling Operations Boxplot

  14. Material Costs Scatterplot

  15. Labor Hours Scatterplot

  16. Milling Operations Scatterplot

  17. Message • Which variable is most related to the response? • Explain in the context of this manufacturing situation where the correlation is not perfect and what this lack of perfection means for predicting the cost of an order.

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