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.	$	4,600			640
Feb.		3,400			480
Mar.		4,000			560
Apr.		3,220			460
May		4,750			660
June		3,360			470
July		3,430			480
Aug.		4,870			700
Sept.		4,660			650
Oct.		4,450			630
Nov.		3,700			510
Dec.		3,560			500
Sum	$	48,000			6,740
Average	$	4,000		$	562
Average cost per hour				$	7.00
a (intercept)				$	38.71
b (coefficient)					7.0527
Standard error of the estimate					52.8466
R-squared					0.9935
t-value for b					39.130

Based on the data derived from the regression analysis, 420 maintenance hours in a month mean that maintenance costs should be budgeted to the nearest dollar at

Multiple Choice

• $3,054.

• $3,524.

• $3,068.

• $3,001.

• None of these answer choices are correct.