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
| 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) | |||||||
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