1. 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		480			$	4,200
   February		320				3,000
   March		400				3,600
   April		300				2,820
   May		500				4,350
   June		310				2,960
   July		320				3,030
   August		520				4,470
   September		490				4,260
   October		470				4,050
   November		350				3,300
   December		340				3,160
   Sum		4,800			$	43,200
   Average		400				3,600
   A coefficient						684.65
   B coefficient						7.2884
   Standard error of the a coefficient		49.515
   Standard error of the b coefficient		0.12126
   Standard error of the estimate						34.469
   R2						0.99724
   T-value a						13.827
   T-value b						60.105

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

   		$0.1111.
   		$0.1333.
   		$7.50.
   		$9.00.