Here Is the Output from Two Regression Models for Overhead

question 68

Essay

Here is the output from two regression models for overhead costs at a university using number of academic programs and number of students as potential cost drivers.
Number of academic programs
Adjusted R-square = 0.72
Intercept = 7,127.75 t-statistic = 2.14 p-value = .05
X1 variable = 240.64 t-statistic = 5.08 p-value = .001
Number of students
Adjusted R-square = 0.55
Intercept = 5,991.75 t-statistic = 1.18 p-value = .35
X1 variable = 3.78 t-statistic = 3.53 p-value = 0.01
a)Develop a cost function for each potential cost driver.
b)Compare the output for the two drivers. Choose the best cost driver for overhead costs and explain how you made that choice.
c)Suppose you use the best cost function from part (b)to estimate overhead cost for the next semester. Why is it highly unlikely that the actual cost will be exactly the same as the cost you estimated?

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Definitions:

Latent Learning

A form of learning that occurs without obvious reinforcement or visible behavior change until there is a motive to demonstrate it.

Unconditioned Stimulus

A stimulus that naturally and automatically triggers a response without any learning process.

Conditioned Stimulus

A previously neutral stimulus that, after association with an unconditioned stimulus, elicits a conditioned response.

Unconditioned Response

The automatic or natural reaction to a stimulus in classical conditioning, which occurs without the necessity for prior learning.