Midgett Co. has accumulated data to use in preparing its annual profit plan for the...
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Accounting
Midgett Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff suggested that linear regression be employed 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 are as follows:
Month
Maintenance Cost
Machine Hours
Jan.
$
5,030
540
Feb.
3,630
360
Mar.
4,400
560
Apr.
3,341
350
May
5,235
650
June
3,350
370
July
3,713
500
Aug.
5,345
770
Sept.
5,122
570
Oct.
4,856
660
Nov.
3,949
360
Dec.
3,810
420
Sum
$
51,781
6,110
Average
$
4,315.08
509.17
Average cost per hour ($51,781/6,110) = $8.47 (rounded to the nearest cent)
r = 0.89170
r2 = 0.79513
The percent of the total variance that can be explained by the regression equation is:
Multiple Choice
79.554%.
49.403%.
60.782%
79.513%.
79.375%.
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