A Manufacturing Company uses two different independent variables in two different equations to evaluate the cost activities of the packaging department, machine-hours and number of packages. The most recent month's results of the two regressions are as follows:
Machine hours:

r² = 0.29
Number of packages:

r² = 0.61
Required:
a. What are the estimating equations for each cost driver?
b. Which cost driver is best and why?

Question

A Manufacturing Company uses two different independent variables in two different equations to evaluate the cost activities of the packaging department, machine-hours and number of packages. The most recent month's results of the two regressions are as follows:
Machine hours:

r² = 0.29
Number of packages:

r² = 0.61
Required:
a. What are the estimating equations for each cost driver?
b. Which cost driver is best and why?

Quizplus · Accepted Answer

The Answer of A Manufacturing Company uses two different independent variables in two different equations to evaluate the cost activities of the packaging department, machine-hours and number of packages. The most recent month's results of the two regressions are as follows: Machine hours: r² = 0.29 Number of packages: r² = 0.61 Required: a. What are the estimating equations for each cost driver? b. Which cost driver is best and why?

A Manufacturing Company Uses Two Different Independent Variables in Two