Boxes- R- Us Manufactures Various Cardboard Boxes

question 49

Essay

Boxes- R- Us manufactures various cardboard boxes. 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 20X0:
1. x = gluing time y = $29,000 + $10x r2 = 0.75 2. x = labor y = $12,000 + $15x r2 = 0.50 3. x = machinery y = $15,000 + $5x r2 = 0.45
Required:
a. Which equation should be selected for the analysis?
b. What are other factors that should be included in the selection of the estimating equation?

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Definitions:

Horizontal Axis

In a graph or chart, the x-axis that runs from left to right, commonly used to represent the independent variable.

Vertical Axis

A line or reference point on a graph or chart that typically represents the dependent variable or outcome in an analysis.

Marginal Utility

The additional satisfaction or benefit (utility) that a consumer derives from consuming one more unit of a good or service.

Optimum

The most favorable condition or highest achievable level of efficiency under the given circumstances.