Question
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
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. | $ | 4,550 | 620 | |||
| Feb. | 3,350 | 460 | ||||
| Mar. | 3,950 | 540 | ||||
| Apr. | 3,170 | 440 | ||||
| May | 4,700 | 640 | ||||
| June | 3,310 | 450 | ||||
| July | 3,380 | 460 | ||||
| Aug. | 4,820 | 680 | ||||
| Sept. | 4,610 | 630 | ||||
| Oct. | 4,400 | 610 | ||||
| Nov. | 3,650 | 490 | ||||
| Dec. | 3,510 | 480 | ||||
| Sum | $ | 47,400 | 6,500 | |||
| Average | $ | 3,950 | $ | 542 | ||
| Average cost per hour | $ | 7.00 | ||||
| a (intercept) | $ | 129.7693 | ||||
| b (coefficient) | 7.0527 | |||||
| Standard error of the estimate | 52.8466 | |||||
| R-squared | 0.9935 | |||||
| t-value for b | 39.130 | |||||
The percent of the total variance that can be explained by the regression equation is
Multiple Choice
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99.351%.
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199.290%.
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266.402%.
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None of these answer choices are correct.
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124.137%.
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