Boxes- R- Us manufactures various cardboard boxes. Because the efforts of manufacturing are approximately equal between labor and machinery, management is considering other possible cost drivers. By considering different cost drivers, it is anticipated that the estimating process can be improved. The following cost estimating equations with their r2 values have been determined for 20X0:
1. x = gluing time y = $29,000 + $10x r2 = 0.75 2. x = labor y = $12,000 + $15x r2 = 0.50 3. x = machinery y = $15,000 + $5x r2 = 0.45
Required:
a. Which equation should be selected for the analysis?
b. What are other factors that should be included in the selection of the estimating equation?

Question

Quizplus · Accepted Answer

The Answer of Boxes- R- Us manufactures various cardboard boxes. Because the efforts of manufacturing are approximately equal between labor and machinery, management is considering other possible cost drivers. By considering different cost drivers, it is anticipated that the estimating process can be improved. The following cost estimating equations with their r2 values have been determined for 20X0:
1. x = gluing time y = $29,000 + $10x r2 = 0.75 2. x = labor y = $12,000 + $15x r2 = 0.50 3. x = machinery y = $15,000 + $5x r2 = 0.45
Required:
a. Which equation should be selected for the analysis?
b. What are other factors that should be included in the selection of the estimating equation?

Boxes- R- Us Manufactures Various Cardboard Boxes