Cross Distribution Company Uses Two Different Independent Variables (Number of Orders

question 64

Essay

Cross Distribution Company uses two different independent variables (number of orders and weight of orders)in two different equations to evaluate costs of the packaging department.The most recent results of the two regressions are as follows:
Number of orders:
Weight of orders:
There were twenty degrees of freedom.The critical value at the 95% level is 1.729.Required:
a.What are the estimating equations for each cost driver?
b.Which cost driver is best and why?
c.Prepare the cost equation using the following high and low points:

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Definitions:

Utility Function

A mathematical representation used in economics to model the preference or satisfaction a consumer derives from consuming goods and services.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute one good for another.

Income Effect

The change in an individual's or market's consumption resulting from a change in real income.

Inferior Good

A type of good for which demand decreases as the income of consumers increases.