Stow-a-way Luggage Ltd.manufactures luggage for the traveler concerned about excessive airline luggage fees.They have two designs of carry-on luggage.The "Exec" is targeted to business travelers and the "Companion" for those on a holiday.The company used simple regression to budget indirect costs of $823,400 based on the following equation: y = $542,400 + $5.62X, where X is 50,000 direct labour hours for a budgeted production of 250,000 units.At the end of the year the company's controller evaluated the actual costs for producing 220,000 units.Using simple regression that actual indirect cost of $810,825; represented by the following equation y = $535,400 + $5.75X for the 47,900 actual direct labour hours.Required:
a.Determine the rate, efficiency/production-volume variances for the indirect costs.
b.What statistical measure of serial correlation could the controller use to determine if the independence of the residuals is within an acceptable range?

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The Answer of Stow-a-way Luggage Ltd.manufactures luggage for the traveler concerned about excessive airline luggage fees.They have two designs of carry-on luggage.The "Exec" is targeted to business travelers and the "Companion" for those on a holiday.The company used simple regression to budget indirect costs of $823,400 based on the following equation: y = $542,400 + $5.62X, where X is 50,000 direct labour hours for a budgeted production of 250,000 units.At the end of the year the company's controller evaluated the actual costs for producing 220,000 units.Using simple regression that actual indirect cost of $810,825; represented by the following equation y = $535,400 + $5.75X for the 47,900 actual direct labour hours.Required:
a.Determine the rate, efficiency/production-volume variances for the indirect costs.
b.What statistical measure of serial correlation could the controller use to determine if the independence of the residuals is within an acceptable range?

Stow-A-Way Luggage Ltd