What would be the cost equation if the high-low method is

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Reference no: EM13577807

The Armer Company is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff has suggested that linear regression be employed to derive an equation in the form of y = a + bx for maintenance costs. Data regarding the maintenance hours and costs for last year and the results of the regression analysis are as follows:

	Hours of Activity	Maintenance Costs
January	530	$ 4,300
February	350	3,500
March	410	3,900
April	310	2,600
May	460	4,370
June	320	3,180
July	300	3,280
August	460	4,680
September	460	4,620
October	500	4,270
November	310	3,300
December	370	3,270

Sum	4,780	45,270
Average	398	3,773

A coefficient		888.14
B coefficient		7.2411
Standard error of the a cofficient	493.814
Standard error of the a cofficient	1.21636
Standard error of the estimate		330.364
R²		0.77992
T-value a		1.799
T-value b		5.953

What would be the cost equation if regression analysis is used?

	A. Maintenance Costs = 888.14 + 7.2411 × Hours of Activity.
	B. Maintenance Costs = 888.14 + 493.814 × Hours of Activity.
	C. Maintenance Costs = 330.364 + 0.77992 × Hours of Activity.
	D. Maintenance Costs = 7.2411 + 888.14 × Hours of Activity.

	Hours of Activity	Maintenance Costs
January	460	$ 4,300
February	340	3,300
March	420	3,400
April	270	2,970
May	480	4,370
June	300	2,990
July	330	3,140
August	530	4,530
September	500	4,100
October	480	4,250
November	380	3,100
December	330	3,160

Sum	4,820	43,610
Average	402	3,634

A coefficient		988.42
B coefficient		6.5869
Standard error of the a cofficient	315.893
Standard error of the a cofficient	0.76986
Standard error of the estimate		223.613
R²		0.87981
T-value a		3.129
T-value b		8.556

What would be the cost equation if the high-low method is used?

	A. Maintenance Costs = 8.10 × Hours of Activity.
	B. Maintenance Costs = 1,350 + 6.00 × Hours of Activity.
	C. Maintenance Costs = 223.613 +0.87981 × Hours of Activity.
	D. Maintenance Costs = 3,634 + 402 × Hours of Activity.

Reference no: EM13577807

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