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Problem 1: Arco Machines Inc. (Forecasting Costs) Lin, the owner of Arco Machines Inc., is trying to forecast operating costs for the next month.

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Problem 1: Arco Machines Inc. (Forecasting Costs) Lin, the owner of Arco Machines Inc., is trying to forecast operating costs for the next month. Lin estimates that the company will utilize 10,000 machine hours next month. To estimate operating costs, Lin collected operating costs for the past 18 months Month Operating Costs # of Machine hours 1 $1,125,935 12,373 2 $1,169,406 16,452 3 $1,179,728 18,326 4 $1,097,830 10,680 5 $1,017,526 8,454 6 $1,107,438 12,342 7 $1,052,324 8,128 8 $1,066,952 10,545 9 $1,156,168 15,321 10 $1,121,332 15,462 11 $1,147,716 16,533 12 13 14 15 16 22456 $1,139,938 18,928 $1,201,681 19,741 $1,025,205 8,748 $1,051,026 11,247 $1,103,678 10,263 17 $1,080,449 10,354 18 $1,037,590 8,795 (1) Using High-Low method, a) What are the estimated monthly fixed costs and the estimated variable cost per machine hour? (2 points) b) What is the estimated operating cost of utilizing 10,000 machine hours if Lin uses the High-Low method? (2) Using simple regression, a) (1 point) What are the estimated monthly fixed costs and the estimated variable cost per machine hour? points) b) What percentage of the variation in costs is explained by the regression equation? (0.5 points) (2

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