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 were 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: $7.2884 R®: 79724 459 Problem 11.45 Interpretation of Regression Results: Simple Regression

(LO 3,4)

eXcel mhhe.com/hilton4e Problem 11.46 Interpretation of Regression Results

(LO 3)

460 Part4 Planning and Decision Making Required

a. Inaregression equation expressed as y = a + bx, what is the letter b best described as?

b. What is the letter y in the regression equation best described as?

c. What is the letter x in the regression equation best described as?

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