Question

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?

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.