Rush Company Is Trying to Find an Appropriate Allocation Base

Essay

Rush Company is trying to find an appropriate allocation base for factory overhead.Presented are five months of data:
$\begin{array}{|l|c|c|c|}\hline \text { Month } & \begin{array}{c}\text { Direct Labour } \\\text { Hours }\end{array} & \text { Machine Hours } & \text { Factory Overhead } \\\hline \text { January } & 10 & 3 & \$ 45 \\\hline \text { February } & 20 & 5 & 75 \\\hline \text { March } & 15 & 4 & 70 \\\hline \text { Apri } & 30 & 5 & 130 \\\hline \text { May } & 25 & 3 & 80\\\hline \end{array}$ r= $$\frac { \Sigma ( X - X ) ( Y \cdot Y ) } { \left( \Sigma ( X - X ) ^ { 2 } \Sigma ( Y - Y ) ^ { 2 } \right) ^ {5 } }$$
a.Calculate the correlation coefficient between factory overhead and direct labour hours.
b.Calculate the correlation coefficient between factory overhead and machine hours.
c.Should Rush Company use direct labour hours or machine hours for its allocation base for factory overhead? Why?