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Carrington Shippers operates a transshipping system to deliver products customers purchase using the internet. The management is seeking a more systematic method for the purpose
Carrington Shippers operates a transshipping system to deliver products customers purchase using the internet. The management is seeking a more systematic method for the purpose c estimating packaging cost for the units being shipped. It has received information from thi management accountant on the two most likely cost drivers for the estimation of packaging cost. The two cost drivers identified are weight in grams (WG) and the number of packages ( of Packages). The regression information is presented below. Regression 1: Packaqinq Cost =a+(bWG) The critical t-value for each regression is 2.069 (table II, d.f. =23,/2=0.025 ) Required 1) Which of the cost drivers is the best for the estimating the periods packaging cost in terms of economic plausibility, strength of the linear relationship, statistical significance of the slope coefficient and the Durbin -Watson statistic? (10 marks) 2) What would be the best estimate for expected packaging cost if there are 50,000,000 grams and 2,100 packages are budgeted to be shipped? ( 3 marks)
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