(High-low method) Historic Abodes Corp. builds replicas of residences of fa¬ mous and infamous people. The company is highly automated, and the new accountant owner has decided to use machine hours as the basis for pre¬ dicting maintenance costs. The following data are available from the com¬ pany’s most recent eight months of operations:

a. Using the high-low method, determine the cost formula for maintenance costs with machine hours as the basis for estimation.

b. What aspect of the estimated equation is bothersome? Provide an expla¬ nation for this situation.

c. Within the relevant range, can the formula be reliably used to predict maintenance costs? Can the a and b values in the cost formula be inter¬ preted as fixed and variable costs? Why or why not?LO1.

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Maintenance Machine Hours Costs 4,000 $735 7,000 600 3,500 840 6,000 550 3,000 980 9,000 440 8,000 510 5,500 600