=+3-34 KK Interpreting regression results, matching time periods OBJECTIVES 4, 5 Cashmere Apparel produces equipment for the extreme-sports market. It has four peak periods, each lasting two months, for manufacturing the inventory suited for spring, summer, autumn and winter. In the off-peak periods, Cashmere Apparel schedules equipment maintenance and runs advertising to generate demand for its upcoming seasonal inventory. Cashmere Apparel’s management accountant, Helen Green, wants to understand the drivers of equipment maintenance costs and the effect of advertising expenditures on sales. A regression analysis of two years of monthly data yields the following relationships:

Maintenance costs = $31 500 – ($3.30 per machine-hour × Number of machine-hours)

Sales revenue = $465 000 – ($2.70 × Advertising expenditure)

Upon examining the results, Helen comments: ‘So, all I have to do to reduce maintenance costs is run my machines longer! And, clearly our advertising function is broken: the more we spend on advertising, the lower our sales revenue.’

Required 1 Explain why Helen Green made this comment.