Question Details

What are the estimating equations for each cost driver



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:
	Variable	Coefficient	Standard Error	t-Value
	Constant	$748.30	$341.20	2.19
	Independent Variable	$52.90	$35.20	1.50 

	r2 = 0.33 

Number of packages:
	Variable	Coefficient	Standard Error	t-Value
	Constant	$242.90	$75.04	3.24
	Independent Variable	$5.60	$2.00	2.80 

	r2 = 0.73 

Required: 
a.	What are the estimating equations for each cost driver?
b.	Which cost driver is best and why? 




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