Disadvantages and advantages of using a separate statistical method in management accounting

Abstract

Advantages of simple linear regression analysis are as follows:  Easy to use;  Considers the main relationship between two sets of data;  Can be used to prepare forecasts and budgets;  Simplifies the budgeting process. Limitations of simple linear regression analysis are as follows:  It assumes that there is a linear relationship between the variables;  The relationship between only two variables is evaluated. In fact, the dependent variable is influenced by many other independent variables;  Tendonously, only interpolation predictions are reliable. Equation should not be used for extrapolation;  Regression analysis assumes that the historical behavior of data in the past will continue in the near future too;  Interpolation forecast is reliable between data, only in case of strong correlation.