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The Armer Company is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the

The Armer Company is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff has suggested that linear regression be employed to derive an equation in the form of y = a + bx for maintenance costs. Data regarding the maintenance hours and costs for last year and the results of the regression analysis are as follows:

Hours of Activity Maintenance Costs
January 530 $ 4,500
February 310 2,800
March 430 3,000
April 270 3,180
May 470 4,400
June 330 3,360
July 340 3,240
August 530 4,080
September 500 4,260
October 470 4,380
November 330 3,600
December 340 2,950
Sum 4,850 43,750
Average 404 3,646

A coefficient 1,380.51
B coefficient 5.6049
Standard error of the a cofficient 509.794
Standard error of the a cofficient 1.23146
Standard error of the estimate 382.134
R2 0.67443
T-value a 2.708
T-value b 4.551

What would be the cost equation if regression analysis is used?

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