The McGraw 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: (CMA adapted)

	Hours of Activity				Maintenance Costs
January		580			$	4,260
February		350				3,060
March		460				3,660
April		330				2,880
May		560				4,410
June		354				3,020
July		350				3,090
August		570				4,530
September		550				4,320
October		530				4,110
November		400				3,360
December		380				3,220
Sum		5,424			$	43,920
Average		452				3,660
A coefficient						895.24
B coefficient						6.1167
Standard error of the a coefficient		108.488
Standard error of the b coefficient		0.23465
Standard error of the estimate						79.009
R2						0.98550
T-value a						8.252
T-value b						26.067

What is the variable cost per hour using the high-low method to estimate the cost equation?

rev: 10_18_2019_QC_CS-186952

Multiple Choice

• $6.62

• $5.52

• $0.0980

• $0.0818