Rush Company Is Trying to Find an Appropriate Allocation Base

question 7

Essay

Rush Company is trying to find an appropriate allocation base for factory overhead. Presented are five months of data: r = Required:
a.
Calculate the correlation coefficient between factory overhead and direct labour hours.
b.
Calculate the correlation coefficient between factory overhead and machine hours.
c.
Should Rush Company use direct labour hours or machine hours for their allocation base for factory overhead? Why?

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.