Pam\'s Stables used two different independent variables (trainer hours and numbe

Question

Pam's Stables used two different independent variables (trainer hours and number of horses) in two different equations to evaluate the cost of training horses. The most recent results of the two regressions are as follows:

Trainer's hours:

Variable                             Coefficient      Standard Error       t-Value

Constant                                 $913.32                 $198.12           4.61

Independent Variable              $20.90                     $2.94           7.11

r2 = 0.56

Number of horses:

Variable                             Coefficient      Standard Error       t-Value

Constant                              $4,764.50              $1,073.09           4.44

Independent Variable            $864.98                 $247.14           3.50

r2 = 0.63

What is the estimated total cost for the coming year if 16,000 trainer hours are incurred and the stable has 400 horses to be trained, based on the best cost driver?

A) $99,929.09

B) $350,756.50

C) $335,313.32

D) $13,844,444.50

Explanation / Answer

B) $350,756.50

y = $4,764.50 + $864.98(400) = $350,756.50 based on highest r2

, which uses # of

horses as the cost driver

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