CAN THIS AICPA RELEASE QUESTION BE WRONG??

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• #2925345
Mujahid_ Abu Dahda
Participant

I was going thru this AICPA Release question on BEC and I was wondering why choice B is the best answer.
Roger Co. implemented activity-based costing in the current year. To select the appropriate driver for Cost Pool A, Roger performed regression analyses for two independent variables, Driver 1 and Driver 2, using monthly operating data. The monthly levels of Cost Pool A were the dependent variables in both regressions. Output results from the regression analyses were as follows:

Driver 1 Driver 2
R squared 0.46 0.80
Intercept \$551.00 \$970.00
X variable (slope) \$ 0.55 \$ 0.33

At the budgeted production level for next month, the levels of Driver 1 and Driver 2 are expected to be 5,880 and 7,000, respectively. Based on this information, what is the budgeted amount for Cost Pool A for next month?
A. \$2,624 B. \$3,280 C. \$3,464 D. \$3,785

My suggested solution is this:
Cost pool A for Driver 1 = \$551 +\$0.55(5800) = \$3,785
Cost pool A for Driver 2 = \$970 + \$0.33(7000) =\$3,280
Budgeted amount for Cost pool A is \$3,785 + \$3,280 = \$7,065

Unfortunately, my answer is not among the options above. Any help on why ‘B'is the best answer???

#2925354
CPAHOPE
Participant

You already computed the answer 3280 for driver 2. You only choose driver 2 as the answer because R squared is larger than driver 1. As R squared becomes larger as percentage, it better reflects the variation of changes of Y variable based on changes of x variable.

AUD - 39
BEC - 76
FAR - 56
REG - 79
FAR 57,61,57,56 (F*)

REG 54,49,69,66, 79

AUD 39(lol)

BEC 64,60,50(lol),70,67,71,76

"Theres no limit unless you allow it"

"Why not?"

"I dont believe in limits"

#2926773
Mujahid_ Abu Dahda
Participant

Thank you @ CPAHOPE!!

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