Scranton Printer Company Would Like to Estimate Its Total Manufacturing

question 78

Essay

Scranton Printer Company would like to estimate its total manufacturing costs using regression analysis but is unsure whether machine hours or units produced would be a better predictor of total manufacturing costs.
Output from regression analysis using machine hours as the volume (cost driver)follows. Note: the results are excerpts so not all of the regression analysis results are presented.
Output from a regression analysis using units produced as the volume (cost driver)follows. Again, the results are excerpts so not all of the regression analysis results are presented.
Required:
a. What is the cost equation if machine hours is used as the volume (cost driver)?
b. Predict total manufacturing costs using machine hours as the volume (cost driver)if Scranton Paper Company uses 18,000 hours.
c. What is the cost equation if units produced is used as the volume (cost driver)?
d. Predict total manufacturing costs using units produced as the volume (cost driver)if Scranton Paper Company produces 65,000 units.
e. Which volume (cost driver)is a better predictor of total manufacturing costs? Why?

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Definitions:

Gtt

A medical abbreviation for "guttae," meaning drops; often used in prescriptions to specify medication dosages in drop form.

Proportion

A part, share, or number considered in comparative relation to a whole.

Ratio

A quantitative relationship between two numbers showing how many times one value contains or is contained within the other.

Fluid Ounce

A unit of volume used primarily in the United States to measure liquids, equivalent to approximately 29.57 milliliters.