Business, 15.06.2020 19:57 salvadorjr1226p4zkp3

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 510 $ 4,400
February 310 3,000
March 420 3,400
April 280 2,840
May 510 4,350
June 260 2,990
July 340 2,950
August 520 4,610
September 500 4,330
October 470 3,920
November 370 3,100
December 350 3,060
Sum 4,840 42,950
Average 403 3,579

A coefficient 852.03
B coefficient 6.7615
Standard error of the a cofficient 277.823
Standard error of the a cofficient 0.67136
Standard error of the estimate 215.323
R2 0.91026
T-value a 3.067
T-value b 10.071
What would be the cost equation if the high-low method is used?
A. Maintenance costs = 3,579 + 403 x Hours of activity
B. Maintenance costs = 1,370 + 6.23 x Hours of activity
C. Maintenance costs = 215.323 + 0.91026 x Hours of activity
D. Maintenance costs = 8.10 x Hours of activity

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