Pepper Company 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:

Month	Maintenance Cost	Machine Hours
January	$ 5,070	610
February	3,651	320
March	4,250	610
April	3,302	310
May	5,211	620
June	3,360	480
July	3,753	510
August	5,351	680
September	5,110	610
October	4,855	670
November	3,959	560
December	3,960	340
Sum	$ 51,832	6,320
Average	$ 4,319.33	526.67

Average cost per hour ($51,832/6,320) = $8.20

r = 0.80479

r² = 0.64769

Using the high-low method, unit variable cost is calculated to be:

Multiple Choice

• $5.59.

• $7.43.

• $5.54.

• $6.64.

• $5.24.