Significance of High R-Squared (LO12)
Mark Adams had always been suspicious of “new-fangled mathematical stuff,” and the most recent suggestion of his new assistant merely con?rmed his belief that schools are putting a lot of useless junk in students’ heads. It seems that after an extensive analysis of historical data, the assistant suggested that the number of pounds of scrap was the best basis for predicting manufacturing overhead. In response to Mr. Adams’s rage, the slightly intimidated assistant indicated that of the 35 equations he tried, pounds of scrap had the highest coef?cient of determination with manufacturing overhead.
Comment on Adams’s reaction.
Is it justi?ed?
Is it likely that the number of pounds of scrap is a good basis for predicting manufacturing overhead?
Is it a feasible basis for predicting manufacturing overhead?