Explain two advantages of using simple linear regression

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Question-

A. A ltd. has three production departments (P, Q and R) and two service departments (X and Y). The total overheads for the departments are given below:

Department Overheads

P $35,000

Q $64,000

R $19,000

X $22,000

Y $38,000

The reallocation percentages of the service departments' costs are given below:

Department P Q R X Y

X 20% 25% 25% - 10%

Y 25% 30% 30% 15% -

Use the simultaneous equation method to allocate the service department overheads to production departments.

B. Explain two advantages of using simple linear regression method for cost estimation.

Reference no: EM132647390

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