Skyway Inc. identified a cost pool related to material handling costs for its manufacturing process. Using historical data and ordinary least squares regression, Skyway summarized two different equations to estimate the cost of material handling. The first equation uses pounds of materials as the cost driver and the second equation uses number of units produced as the cost driver.

The range of activities for the year is estimated to be 225 to 275 pounds of material or 200 to 300 units of production.

a. Which is the preferred cost driver for estimating material handling costs?

b. What is the best estimate for the range of costs related to materials handling costs?

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Variable Pounds of materials handled... Number of units produced Coefficient of Determination 0.73 0.33 Estimation Equation y= $2,500+ $60x y= $7,480+ $53x