Rush Company Is Trying to Find an Appropriate Allocation Base

question 43

Essay

Rush Company is trying to find an appropriate allocation base for factory overhead.Presented are five months of data:
$\begin{array}{|l|c|c|c|}\hline \text { Month } & \begin{array}{c}\text { Direct Labour } \\\text { Hours }\end{array} & \text { Machine Hours } & \text { Factory Overhead } \\\hline \text { January } & 10 & 3 & \$ 45 \\\hline \text { February } & 20 & 5 & 75 \\\hline \text { March } & 15 & 4 & 70 \\\hline \text { Apri } & 30 & 5 & 130 \\\hline \text { May } & 25 & 3 & 80\\\hline \end{array}$ r= $$\frac { \Sigma ( X - X ) ( Y \cdot Y ) } { \left( \Sigma ( X - X ) ^ { 2 } \Sigma ( Y - Y ) ^ { 2 } \right) ^ {5 } }$$
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 its allocation base for factory overhead? Why?

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Definitions:

Array

A data structure that stores a fixed-size sequential collection of elements of the same type.

Data Types

Categories of data that specify the kind of value that a variable can hold in programming, such as integers, floats, or strings.

Memory Organization

The way in which memory is structured and managed in a computer system, affecting data access and storage efficiency.

ControlLogic (CLX) Controller

A type of programmable logic controller (PLC) used in industrial applications for automation and control.