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.
$
4,500
600
Feb.
3,300
440
Mar.
3,900
520
Apr.
3,120
420
May
4,650
620
June
3,260
430
July
3,330
440
Aug.
4,770
660
Sept.
4,560
610
Oct.
4,350
590
Nov.
3,600
470
Dec.
3,460
460
Sum
$
46,800
6,260
Average
$
3,900
$
522
Average cost per hour
$
7.00
a (intercept)
$
220.82
b (coefficient)
7.0527
Standard error of the estimate
52.847
R-squared
0.9935
t-value for b
39.130
The coefficient of determination for Armer's regression equation for the maintenance activities is
Multiple Choice
52.847/95.255.
0.9935.
square root of 0.9935.
(0.9935)2.
None of these answer choices are correct.
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