Ken Howard, financial analyst at QTY Corporation, is examining the behavior of quarterly maintenance costs for budgeting purposes. Howard collects the following data on machine-hours worked and maintenance costs for the past 12 quarters.

1. Estimate the cost function for the quarterly data using the high– low method.
2. Plot and comment on the estimated cost function.
3. Howard anticipates that QTY will operate machines for 75,000 hours in quarter 13. Calculate the predicted maintenance costs in quarter 13 using the cost function estimated in requirement 1.
4. Would there be much value to estimating the cost function using the regression method instead of the high– low method used in requirement 1?Explain.

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Quarter Machine Hours 75,000 95,000 85,000 105,000 70,000 90,000 Maintenance Costs $195,000 230,000 210,000 250,000 180,000 225,000 205,000 245,000 200,000 235,000 190,000 285,000 180,000 100,000 80,000 100,000 90,000 130,000 10 12