Sago Co. uses regression analysis to develop a model for predicting overhead costs. Two different cost drivers (machine hours and direct materials weight) are under consideration as the independent variable. Relevant data were run on a computer using one of the standard regression programs, with the following results:
|
Coefficient |
|
|
Machine hours |
|
|
Y Intercept |
2,500 |
|
B |
5.0 |
|
R2= .70 |
|
|
Direct materials weight |
|
|
Y Intercept |
4,600 |
|
B |
2.6 |
|
R2= .50 |
What regression equation should be used?
- Y = 2,500 + 5.0X
- Y = 2,500 + 3.5X
- Y = 4,600 + 2.6X
- Y = 4,600 + 1.3X