A paper company manufactures cardboard boxes. Because the efforts of manufacturing are approximately equal between labour 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 r, values have been determined for 2015:
‪
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

A paper company manufactures cardboard boxes. Because the efforts of manufacturing are approximately equal between labour 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 r, values have been determined for 2015:
‪  
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?

Quizplus · Accepted Answer

The Answer of A paper company manufactures cardboard boxes. Because the efforts of manufacturing are approximately equal between labour 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 r, values have been determined for 2015:
‪  
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?

A Paper Company Manufactures Cardboard Boxes