Armer Company is accumulating data to use in preparing its annual profit plan for the coming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff has suggested the use of linear regression to derive an equation for maintenance hours and costs. Data regarding the maintenance hours and costs for the last year and the results of the regression analysis follow:

Month	Maintenance Cost			Machine Hours
Jan.	$	4,700			680
Feb.		3,500			520
Mar.		4,100			600
Apr.		3,320			500
May		4,850			700
June		3,460			510
July		3,530			520
Aug.		4,970			760
Sept.		4,760			690
Oct.		4,550			670
Nov.		3,800			550
Dec.		3,660			540
Sum	$	49,200			7,240
Average	$	4,100		$	603
Average cost per hour				$	7.00
a (intercept)				$	3.8570
b (coefficient)					6.7892
Standard error of the estimate					83.4170
R-squared					0.9838
t-value for b					24.6685

If Armer Company uses the high-low method of analysis, the equation for the relationship between hours of activity and maintenance cost follows:

Multiple Choice

• y = 603 + 7.0x

• y = 147 + 7x

• y = 4,100 + 603x

• y = 147 + 6.3x

• None of these answer choices are correct.