Sago Co. uses regression analysis to develop a model for predicting overhead costs. Two different cost drivers (machine hours and direct materials weight) are under consideration as the independent variable. Relevant data were run on a computer using one of the standard regression programs, with the following results:

Machine hours

Coefficient

y-intercept

2,500

b

5.0

r = .70

Direct materials weight

y-intercept

4,600

b

2.6

r = .50

• Which regression equation should be used?
• A.
• y = 2,500 + 5.0x
• B.
• y = 4,600 + 2.6x
• C.
• y = 4,600 + 1.3x
• D.
• y = 2,500 + 3.5x