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Choose the correct statement(s) that explain the meaning of 200 and 4 in the regression equation S = $200 + $4H.

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• The regression equation's intercept on the vertical axis is $200.
• The slope of the regression line is $4 per machine hour.
• The regression equation's intercept on the vertical axis is $4 per machine hour.
• The slope of the regression line is $200.
• None of these choices are correct.

To determine the validity of the cost estimate computed in requirement 2, what question(s) would you ask the controller about the data used for the regression?

Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Check my work is not available.

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• Do the observations contain any outliers, or are they all representative of normal operations?unanswered
• Are there any mismatched time periods in the data? Are all of the indirect material cost observations matched properly with the machine hour observations?unanswered
• Are there any allocated costs included in the indirect material cost data?unanswered
• Are the cost data affected by inflation?unanswered
• None of these choices are correct.

The controller of Chittenango Chain Company believes that the identification of the variable and fixed components of the firm's costs will enable the firm to make better planning and control decisions. Among the costs the controller is concerned about is the behavior of indirect-materials cost. The controller believes there is a correlation between machine hours and the amount of indirect materials used. A member of the controller's staff has suggested that least-squares regression be used to determine the cost behavior of indirect materials. The regression equation shown below was developed from 40 pairs of observations. S=$200+$4H where S= Total monthly cost of indirect materials H= Machine hours per month Calculate the estimated cost of indirect materials if 900 machine hours are to be used during a month. (Assume that 900 falls vithin the relevant range for this cost equation.)

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