Armer Company is accumulating data to use in preparing its annual profit plan for the...
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Accounting
Armer Company is accumulating data to use 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 the use of linear regression to derive an equation for maintenance hours and costs. Data regarding the maintenance hours and costs for the last year and the results of the regression analysis follow:
Month
Maintenance Cost
Machine Hours
Jan.
$
4,200
480
Feb.
3,000
320
Mar.
3,600
400
Apr.
2,820
300
May
4,350
500
June
2,960
310
July
3,030
320
Aug.
4,470
520
Sept.
4,260
490
Oct.
4,050
470
Nov.
3,300
350
Dec.
3,160
340
Sum
$
43,200
4,800
Average
$
3,600
$
400
Average cost per hour
$
9.00
a (intercept)
$
684.65
b (coefficient)
7.2884
Standard error of the estimate
34.469
R-squared
0.99724
t-value for b
60.105
The coefficient of determination for Armer's regression equation for the maintenance activities is
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