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Want More Info Jeff Mcallister, assistant to the president of Fashion Bling, is interested in better understanding the drivers of purchasing department costs. For many years, Fashion Bling has allocated purchasing department costs to products on the basis of the dollar value of merchandise purchased. A $100 item is allocated 10 times as many overhead costs associated with the purchasing department as a $10 item. Mcallister recently attended a seminar titled "Cost Drivers in the Retail Industry." In a presentation at the seminar, Glory Fabrics, a leading competitor that has implemented activity-based costing, reported number of purchase orders and number of suppliers to be the two most important cost drivers of purchasing department costs. The dollar value of merchandise purchased in each purchase order was not found to be a significant cost driver. Mcallister interviewed several members of the purchasing department at the Fashion Bling store in Miami. They believed that Glory Fabrics' conclusions also applied to their purchasing department Mcallister collects the following data for the most recent year for Fashion Bling's 10 retail department stores: rest mil D Number of Purchase Orders (No. of Pos) 4,350 Number of Suppliers (No. of Ss) 130 2.555 225 1.438 12 1 Department Store 2 Baltimore 3. Chicago 4 Los Angeles 5 Miami 6 New York 7 Phoenix B Seattle 9 SL Louis 10 Toronto 11 Vancouver B C Purchasing Dollar Value of Department Merchandise Costs (PDC) Purchased (MPS) 1.525,000 $ 68,325.000 1,120.000 33.450,000 535.000 121.100.000 2,042,000 119.550.000 1.050 000 33,520.000 522.000 29.847,000 1.533.000 102.886,000 1,748.000 38.665 000 1,618,000 139.315.000 1.251,000 130.040.000 5.940 193 2.795 20 1.315 39 7.592 1121 3.610 124 1.710 215 4.725 208 the nearest Coefficient Standard Error t Value $ 1.040,594 $ 344,830 3.02 0.0031 0.0037 0.83 Regression 1. PDC = a + b * MPS) Variable Constant Independent variable 1 MPS 2 = 0.08. Durbin-Watson statistic= 2.42 Regression 2: PDC-a+ {* No. of POS) Variable Constant Independent variable 1. No. of POS 22=0.42: Durbin-Watson statistic - 1.99 Regression 3: PDC = a + (b No. of Ss) Variable Coefficient Standard Error t-Value S 731.687 $ 2671395 2.72 159 48 5 05.19 2.40 Coefficient Standard Error t.Value $ 3:23 Constant Independent variable 1: No. of S. 2*0.40: Durbin-Watson statistic - 2.00 802,629 $ 3,8480S 248,566 1,660 S 2.32 0 Requirements 1. Compare and evaluate the three simple regression models estimated by Mcallister Graph each one. 2. Do the regression results support the Glory Fabrics' presentation about the purchasing department's cost drivers? Which of these cost drivers would you recommend in designing an ABC system? Fashion Bling operates a chain of 10 retail department stores. Each department store makes its own purchasing decision Click the icon to view additional information) Mcalistor decides to use simple regression analysis to examine whether one or more of three variables (the last three columns in the table) are cost drivers of purchasing department costs Summary results for these regressions are as follows: m (Click the icon to view the summary costs) Read the fuquitecten Requirement 1. Compare and evaluate the three simple regression models estimated by Mcalistor. Graph each ono We will begin by graphing each regression model. Start with plotting the regression model: PDC = (b XMPS) When growing me stession line, use the highest and lowest values given for Mps, the round the purchasing department contu to the nearest increment of $10,000 and merchandise purchased to the nearest million, (Enlarge the graph and use the line button displayed below to draw the graph) Want More Info Jeff Mcallister, assistant to the president of Fashion Bling, is interested in better understanding the drivers of purchasing department costs. For many years, Fashion Bling has allocated purchasing department costs to products on the basis of the dollar value of merchandise purchased. A $100 item is allocated 10 times as many overhead costs associated with the purchasing department as a $10 item. Mcallister recently attended a seminar titled "Cost Drivers in the Retail Industry." In a presentation at the seminar, Glory Fabrics, a leading competitor that has implemented activity-based costing, reported number of purchase orders and number of suppliers to be the two most important cost drivers of purchasing department costs. The dollar value of merchandise purchased in each purchase order was not found to be a significant cost driver. Mcallister interviewed several members of the purchasing department at the Fashion Bling store in Miami. They believed that Glory Fabrics' conclusions also applied to their purchasing department Mcallister collects the following data for the most recent year for Fashion Bling's 10 retail department stores: rest mil D Number of Purchase Orders (No. of Pos) 4,350 Number of Suppliers (No. of Ss) 130 2.555 225 1.438 12 1 Department Store 2 Baltimore 3. Chicago 4 Los Angeles 5 Miami 6 New York 7 Phoenix B Seattle 9 SL Louis 10 Toronto 11 Vancouver B C Purchasing Dollar Value of Department Merchandise Costs (PDC) Purchased (MPS) 1.525,000 $ 68,325.000 1,120.000 33.450,000 535.000 121.100.000 2,042,000 119.550.000 1.050 000 33,520.000 522.000 29.847,000 1.533.000 102.886,000 1,748.000 38.665 000 1,618,000 139.315.000 1.251,000 130.040.000 5.940 193 2.795 20 1.315 39 7.592 1121 3.610 124 1.710 215 4.725 208 the nearest Coefficient Standard Error t Value $ 1.040,594 $ 344,830 3.02 0.0031 0.0037 0.83 Regression 1. PDC = a + b * MPS) Variable Constant Independent variable 1 MPS 2 = 0.08. Durbin-Watson statistic= 2.42 Regression 2: PDC-a+ {* No. of POS) Variable Constant Independent variable 1. No. of POS 22=0.42: Durbin-Watson statistic - 1.99 Regression 3: PDC = a + (b No. of Ss) Variable Coefficient Standard Error t-Value S 731.687 $ 2671395 2.72 159 48 5 05.19 2.40 Coefficient Standard Error t.Value $ 3:23 Constant Independent variable 1: No. of S. 2*0.40: Durbin-Watson statistic - 2.00 802,629 $ 3,8480S 248,566 1,660 S 2.32 0 Requirements 1. Compare and evaluate the three simple regression models estimated by Mcallister Graph each one. 2. Do the regression results support the Glory Fabrics' presentation about the purchasing department's cost drivers? Which of these cost drivers would you recommend in designing an ABC system? Fashion Bling operates a chain of 10 retail department stores. Each department store makes its own purchasing decision Click the icon to view additional information) Mcalistor decides to use simple regression analysis to examine whether one or more of three variables (the last three columns in the table) are cost drivers of purchasing department costs Summary results for these regressions are as follows: m (Click the icon to view the summary costs) Read the fuquitecten Requirement 1. Compare and evaluate the three simple regression models estimated by Mcalistor. Graph each ono We will begin by graphing each regression model. Start with plotting the regression model: PDC = (b XMPS) When growing me stession line, use the highest and lowest values given for Mps, the round the purchasing department contu to the nearest increment of $10,000 and merchandise purchased to the nearest million, (Enlarge the graph and use the line button displayed below to draw the graph)

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