Arfaei Company manufactures chairs.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 20X5:
1. $X =$ cutting time $\quad y = \$ 19,500 + \$ 20 X \quad r ^ { 2 } = 0.65$
2. $X =$ labor $\quad\quad\quad \mathrm { y } = \$ 5,000 + \$ 25 X \quad \mathrm { r } ^ { 2 } = 0.49$
3. $X =$ machinery $\quad y = \$ 44,500 + \$ 5 X \quad r ^ { 2 } = 0.55$ Required:
a.Which equation should be selected for the analysis?
b.What other factors should be included in the selection of the estimating equation?

Question

Arfaei Company manufactures chairs.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 20X5:
1.

X =

cutting time

\quad y = \$ 19,500 + \$ 20 X \quad r ^ { 2 } = 0.65

2.

X =

labor

\quad\quad\quad \mathrm { y } = \$ 5,000 + \$ 25 X \quad \mathrm { r } ^ { 2 } = 0.49

3.

X =

machinery

\quad y = \$ 44,500 + \$ 5 X \quad r ^ { 2 } = 0.55

Required:
a.Which equation should be selected for the analysis?
b.What other factors should be included in the selection of the estimating equation?

Quizplus · Accepted Answer

The Answer of Arfaei Company manufactures chairs.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 20X5: 1. $X =$ cutting time $\quad y = \$ 19,500 + \$ 20 X \quad r ^ { 2 } = 0.65$ 2. $X =$ labor $\quad\quad\quad \mathrm { y } = \$ 5,000 + \$ 25 X \quad \mathrm { r } ^ { 2 } = 0.49$ 3. $X =$ machinery $\quad y = \$ 44,500 + \$ 5 X \quad r ^ { 2 } = 0.55$ Required: a.Which equation should be selected for the analysis? b.What other factors should be included in the selection of the estimating equation?

Arfaei Company Manufactures Chairs X=X =X= Cutting Time y=$19,500+$20Xr2=0.65\quad y = \$ 19,500 + \$ 20 X \quad r ^ { 2 } = 0.65y=$19,500+$20Xr2=0.65

Arfaei Company Manufactures Chairs $X =$ Cutting Time $\quad y = \$ 19,500 + \$ 20 X \quad r ^ { 2 } = 0.65$