Question
Bay Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs
Bay Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. Data regarding the machine hours and maintenance costs for the last year are as follows:
Month | Maintenance Cost ($) | Machine Hours |
---|---|---|
Jan. | 5040 | 620 |
Feb. | 3600 | 420 |
Mar. | 4320 | 520 |
Apr. | 3380 | 390 |
May | 5220 | 650 |
June | 3550 | 400 |
July | 3640 | 430 |
Aug. | 5360 | 680 |
Sept. | 5110 | 640 |
Oct. | 4860 | 610 |
Nov. | 3960 | 460 |
Dec. | 3790 | 440 |
Sum | $51830 | 6260 |
Average | $4319 | 522 |
Required:
a) Estimate the cost function using the high-low method. Cost Function: ____________________________________
b) Estimate the maintenance expense for a month that the firm expects to operate 600 machine hours (round to nearest whole dollar)? $____________________________________
c) Evaluate 2 measures for precision and 2 measures of reliability of the regression model:
a. Precision: ____________________________________
____________________________________
b. Reliability: ____________________________________
____________________________________
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