(Appendix 2A)Here are the results using regression analysis on maintenance and repair costs for the production machines in a manufacturing company. Two cost drivers were chosen: number of machine setups (X1)and machine hours (X2).
Variable Coefficient t-statistic p-value
intercept 70,324.15 2.81 p

Question

(Appendix 2A)Here are the results using regression analysis on maintenance and repair costs for the production machines in a manufacturing company. Two cost drivers were chosen: number of machine setups (X1)and machine hours (X2).
Variable Coefficient t-statistic p-value
intercept 70,324.15 2.81 p<0.01
X1 14.83 2.39 p <0.05
X2 2.07 2.24 p<0.05
Adjusted R-square = 0.87
a)Write an equation for total cost based upon the regression analysis.
b)What does the Adjusted R-square tell you about the quality of information that would be produced using this cost driver? Explain.
c)Is it economically plausible that the number of setups and machine hours could drive the costs of the maintenance and repair for the machines? Explain.

Quizplus · Accepted Answer

The Answer of (Appendix 2A)Here are the results using regression analysis on maintenance and repair costs for the production machines in a manufacturing company. Two cost drivers were chosen: number of machine setups (X1)and machine hours (X2).
Variable Coefficient t-statistic p-value
intercept 70,324.15 2.81 p<0.01
X1 14.83 2.39 p <0.05
X2 2.07 2.24 p<0.05
Adjusted R-square = 0.87
a)Write an equation for total cost based upon the regression analysis.
b)What does the Adjusted R-square tell you about the quality of information that would be produced using this cost driver? Explain.
c)Is it economically plausible that the number of setups and machine hours could drive the costs of the maintenance and repair for the machines? Explain.

(Appendix 2A)Here Are the Results Using Regression Analysis on Maintenance