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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