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	$ 5,050	610
February	3,643	510
March	4,270	430
April	3,306	350
May	5,235	740
June	3,510	360
July	3,704	460
August	5,361	750
September	5,113	620
October	4,859	700
November	3,959	560
December	3,880	450
Sum	$ 51,890	6,540
Average	$ 4,324.17	545.00

Average cost per hour ($51,890/6,540) = $7.93

r = 0.90181

r² = 0.81326

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

Multiple Choice

• $5.19.

• $7.03.

• $5.14.

• $6.24.

• $4.84.