Standard Error of the Estimate and Confidence Interval Estimation. The production supervisor of Pylex inc. would like to know the range of maintenance cost that should be expected about 90% of the time at the 1,500- machine-hour level of activity. The least squares estimate of maintenance cost at that level of activity is $500. The least squares parameter estimates,—that is, the estimates of fixed cost and the variable cost rate—were derived from a sample of data for a recent 15-month period. The machine hour average for the sample period is 1,300, and the machine hour deviations from its average squared and summed [£(x. — x)2] is 150,000. The prediction error squared E(y. — y/Y] over the same sample period is $49,972.

Required: Compute the standard error of the estimate and the 90% confidence interval estimate for mainte¬ nance cost at the 1,500-machine-hour level of activity.