Mac Renovations has been using the home's interior square feet as his cost driver in estimating costs.
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Question:
Mac Renovations has been using the home's interior square feet as his cost driver in estimating costs. | |||||||
It was brought to his attention that a home's external openings might be a better cost driver in estimating costs. | |||||||
The following data was gathered from the last 12 houses he had painted. | |||||||
House | Square Feet | Openings | Costs | ||||
1 | 2,500 | 7 | $ 2,810 | ||||
2 | 3,150 | 12 | $ 3,742 | ||||
3 | 2,800 | 8 | $ 3,100 | ||||
4 | 2,850 | 8 | $ 3,150 | ||||
5 | 4,750 | 16 | $ 4,700 | ||||
6 | 2,950 | 8 | $ 3,225 | ||||
7 | 2,700 | 7 | $ 2,920 | ||||
8 | 2,550 | 6 | $ 2,836 | ||||
9 | 2,600 | 7 | $ 3,242 | ||||
10 | 3,700 | 13 | $ 4,112 | ||||
11 | 2,650 | 7 | $ 3,210 | ||||
12 | 3,550 | 12 | $ 3,965 | ||||
Compute the scattergraph, the total cost equation, and the r-squared for | |||||||
each cost driver in estimating costs. | |||||||
Which cost driver is better and why? | |||||||
(check figure: square feet variable costs = .86 and openings fixed costs = 1,750.76) |
Related Book For
Cost Management A Strategic Emphasis
ISBN: 978-0078025532
6th edition
Authors: Edward Blocher, David Stout, Paul Juras, Gary Cokins
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