Biden Company Manufactures Small Jewelry Boxes Which Cost Driver Should Be Chosen?
A) Gluing Time in Cost

question 2

Multiple Choice

Biden Company manufactures small jewelry boxes.The company is considering three cost drivers for measuring support costs in the factory.The following cost functions have been estimated using each cost driver:
$\begin{array} { l }\text { Cost Driver }&\text { Cost Function }&R^2\\\text { 1. } X=\text { gluing time in hours }&Y=\$ 20,000+\$ 5 X&R^2=0.20\\\text { 2. } X=\text { labor hours }&Y=\$ 13,000+\$ 10 X&R^2=0.55\\\text { 3. } X=\text { machine hours }&Y=\$ 15,000+\$ 7 X&R^2=0.90\\\end{array}$

Which cost driver should be chosen?

• A) gluing time in hours
• B) labor hours
• C) machine hours
• D) labor hours x gluing time in hours

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Definitions:

Financial Plan

A comprehensive evaluation of an individual's or organization's current pay and future financial state by using currently known variables to predict future income, asset values, and withdrawal plans.

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