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

question 89

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:

Budgeted Production

The planned level of production output, determined as part of a company's budgeting process to meet expected demand and inventory requirements.

Direct Labor Cost

The total cost of wages paid to employees who are directly involved in the production of goods or services.

Direct Labor-Hours

The number of hours spent by workers who are directly involved in the production process.

Budgeted Cost

An estimate of the financial expenditure for a project, department, or company over a specific period.