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Estimate the maintenance cost for the upcoming period

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Reference no: EM132841500

Question - Hydro Corp. manufactures hydraulic pumps for use in small engines. Hydro uses two different independent variables (manufacturing time and machine hours) in two different equations to evaluate the Maintenance Cost. The most recent results of the two regressions are as follows:

Manufacturing Time:

Variable Coefficient Standard Error t-Value

Constant $1,004.65 $217.93 4.61

Independent Variable $22.99 $3.23 7.11

r2 = 0.56

Machine Hours:

Variable Coefficient Standard Error t-Value

Constant $5,240.95 $1,180.40 4.44

Independent Variable $951.48 $271.85 3.50

r2 = 0.63

Required -

a. Which of Hydro's cost driver's, Machine Hours or Set-ups, is best and why? Identify two reasons to support your choice of best cost driver.

b. What is the cost equation based on the cost driver you chose in part a.

c. Using the equation you chose in part b., estimate the Maintenance Cost for the upcoming period. The Manufacturing Time is expected to be 5,000 and Machine Hours is projected to be 100.

Reference no: EM132841500

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