36. (High-low method) The Evanstonian builds tabletop replicas of some of the most famous lighthouses in North America. The company is highly automated and, thus, maintenance cost is a significant organizational expense. The company’s owner has decided to use machine hours as a basis for predicting maintenance costs and has gathered the following data from the prior eight months of operations:

Number of Maintenance Machine Hours Costs 3,000 $980 4,500 690 8,000 510 7,000 600 6,000 550 9,000 440 3,500 840 5,500 600

a. Using the high-low method, determine the cost formula for maintenance costs.

b. What aspect of the estimated equation is bothersome? Provide an explanation 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 interpreted as fixed and variable costs? Why or why not?