Schotte Manufacturing Company Uses Two Different Independent Variables (Machine-Hours and Number

question 104

Essay

Schotte Manufacturing Company uses two different independent variables (machine-hours and number of packages)in two different equations to evaluate costs of the packaging department. The most recent results of the two regressions are as follows:
Machine-hours:
Number of packages:
Required:
a. What are the estimating equations for each cost driver?
b. Which cost driver is best and why?

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Definitions:

Equity Financing

Raising capital through the sale of shares in a company, resulting in new shareholders and diluting the ownership stake of existing shareholders.

Notes Payable

written promissory notes in which the writer agrees to pay a certain amount of money, at a future date or on demand, to the holder of the note.

Revaluation Accounting

A method under International Financial Reporting Standards (IFRS) that allows an entity to adjust the book value of its assets and liabilities to their fair value.

Tangible Assets

Physical assets that have a form you can touch or handle, like buildings, machinery, and land.