Question

You were given data on two potential cost drivers for material handling costs. You run a...

You were given data on two potential cost drivers for material handling costs. You run a single variable regression for each of the cost drivers with material handling costs. Cost driver A has an R-square of 0.52, and cost driver B has an R-square of 0.61. Why might you not decide to use cost driver B for the purpose of predicting material handling costs?

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Answer #1

Answer:

R-square is the extent of variety for the reliant variable that is clarified by the autonomous or independent variable.

It is likewise called coefficient of determination.

  • A has R-square = 0.52
  • B has R-square = 0.61

We choose not to cost driver B to foresee or predicting material dealing with costs since B clarifies 61% of the variety is clarified by the autonomous variable and that is very high as one variable clarifies such a high extent or high proportion.

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