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Midgett Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs
Midgett 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. The accounting staff suggested that linear regression be employed 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 are as follows: Maintenance Machine Month Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec Sum Cost Hours 620 420 520 390 650 400 430 690 640 610 460 440 6,270 Average $4,320.00 522.50 $ 5,040 3,648 4,320 3,331 5,221 3,550 3,655 5,365 5,110 4,866 3,944 3,790 $ 51,840 Apr. May June July Aug. Sept. oct. Nov. Dec. Sum 3,331 5,221 3,550 3,655 5,365 5,110 4,866 3,944 3,790 $ 51,840 390 650 400 430 690 640 610 460 440 6,270 Average $4,320.00 522.50 Average cost per hour($51,840/6,270)-$8.27 (rounded to the nearest cent) 0.99821 2 0.99780 Using the high-low method, total maintenance cost for 600 hours is calculated to be (round to the nearest dollar): $5,656 $4,755 $4,777 $5,528 $5,293
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