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    Best cost driver for overhead

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    Subject: best cost driver for overhead

    Details: You are trying to determine whether machine hours or direct labor dollars would be the best cost driver for overhead costs. You run two regressions and obtain the following results:

    Machine Hours:
    Multiple R .39429
    R Square .15547
    Adjusted R Square .14964
    Standard error ..44416
    X Variable 6.032
    Intercept 7233.07

    Direct Labor $:
    Multiple R .89429
    R Square .79547
    Adjusted R Square .28964
    Standard error .44416
    X Variable 11.03
    Intercept 8833.07

    Which variable do you belive is the best selection for a cost driver? How did you choose the best cost driver?

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    https://brainmass.com/business/financial-accounting-bookkeeping/best-cost-driver-for-overhead-17803

    Solution Preview

    Of the two, Direct Labor is a better cost driver for the overhead costs than Machine Hours.

    Its R square =.79547

    And

    Adjusted R Square= .28964

    Against the corresponding ...

    Solution Summary

    Machine hours and direct labor dollars are examined to find which is the best cost driver for overhead costs. To arrive at the decision two regressions are run for machine hours and direct labor dollars.

    $2.49

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