The Steps for Using Regression Analysis to Estimate a Cost

question 97

Essay

The steps for using regression analysis to estimate a cost function are listed below in random order. Correctly number the steps from 1 to 8.
____ Write the cost function.
____ Plot the cost for each potential cost driver.
____ Perform the regression analysis.
____ Generate a list of possible cost drivers.
____ Gather cost and cost driver data.
____ Evaluate the sign and significance of the cost function's components.
____ Discard potential cost drivers that fail to explain a high proportion of variability in the cost.
____ Consider the behaviour of the cost.

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Definitions:

Contract

A legally binding agreement between two or more parties, outlining obligations and rights.

Substantial Performance

A legal principle indicating that a party has fulfilled enough of its contractual obligations to warrant payment, even if minor details were not completed as specified.

Conditional Contract

An agreement where the obligations or terms are only to be fulfilled if certain conditions are met.

Condition Concurrent

A situation in a contract wherein the parties involved must perform their respective obligations at the same time.