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Explain why green made this comment
Course:- Managerial Accounting
Reference No.:- EM13180604




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Interpreting regression results, matching time periods Brickman Apparel produces equipment for the extreme-sports market. It has four peak periods, each lasting two months, for manufacturing the merchandise suited for spring, summer, fall, and winter. In the off-peak periods, Brickman schedules equipment maintenance. Brickman's controller, Sascha Green, wants to understand the drivers of equipment maintenance costs. The data collected is shown in the table as follows:

693_Understand the drivers of equipment maintenance costs.png

A regression analysis of one year of monthly data yields the following relationships:

Maintenance costs = $18,552 - ($2.683 * Number of machine-hours)

Upon examining the results, Green comments, ?oSo, all I have to do to reduce maintenance costs is run my machines longer?! This is hard to believe, but numbers don't lie! I would have guessed just the opposite.??

Required

1. Explain why Green made this comment. What is wrong with her analysis?

2. Upon further reflection, Sascha Green reanalyzes the data, this time comparing quarterly machinehours with quarterly maintenance expenditures. This time, the results are very different. The regression yields the following formula:
Maintenance costs = $2,622.80 + ($1.175 * Number of machine-hours)

What caused the formula to change, in light of the fact that the data was thesame?




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