=+3-39 KKK Regression, choosing between models (Appendix 3-1)

Dilbert Toys (DT) makes the popular Floppin’ Freddy Frog and Jumpin’ Jill Junebug dolls in batches. DT incurs set-up costs for each batch of dolls that it produces. DT uses ‘number of set-ups’ as the cost driver for set-up costs.

DT has just hired Bec Williams, an accountant. Bec thinks that ‘number of set-up hours’ might be a better cost driver because the set-up time for each product is different. Bec collects the following data:

1 2

3 A

4 5

6 7

8 B

9 2

1 Month 4

3 5

6 7

8 10 9 Number of set-ups 410 150 480 310 460 420 300 270 300 Number of set-up hours 2680 1160 3800 3680 3900 2980 1200 3280 1840 Set-up costs 126 700 57 480 236 840 178 880 213 760 209 620 90 080 221 040

$104 600 C D Required