Lerner, Inc., is accumulating data to prepare its annual profit plan for the coming year. The behavior pattern of the maintenance costs must be determined. The accounting staff has suggested using regression to derive an equation in the form of y = a + bx for maintenance costs. Monthly data regarding maintenance hours and costs for the preceding year have been entered into the regression analysis.
Total hours of maintenance for the year . . . . 4,800
Total costs for the year . . . . . . . . . . . . . . . . . . $ 43,200
Regression results:
Intercept . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 684.65
b coefficient . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.29
R2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.79724
Required
a. In a regression equation expressed as y = a + bx, how is the letter b best described?
b. How is the letter y in the regression equation best described?
c. How is the letter x in the regression equation best described?
d. Based on the data derived from the regression analysis, what are the estimated costs for 360 maintenance hours in a month?
e. What is the percent of the total variance that can be explained by the regression equation?
(CMA adapted)