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(Solution Download) The Armer Company is accumulating data to be used in preparing its annual profit plan for the coming


 

 

 

 

 

 

 

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

  January510

 

            

$

 

4,200

 

            

  February300

 

            

 

2,900

 

            

  March410

 

            

 

3,700

 

            

  April290

 

            

 

2,960

 

            

  May510

 

            

 

4,330

 

            

  June300

 

            

 

2,920

 

            

  July300

 

            

 

3,010

 

            

  August530

 

            

 

4,630

 

            

  September480

 

            

 

4,100

 

            

  October480

 

            

 

3,940

 

            

  November340

 

            

 

3,200

 

            

  December360

 

            

 

3,280

 

            

 

  Sum4,810

 

            

 

43,170

 

            

  Average401

 

            

 

3,598

 

            

 

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  A coefficient

 

1,014.92     

  B coefficient

 

6.4430     

  Standard error of

 

the a cofficient

127.220

 

    

 

    

  Standard error of

 

the a cofficient

0.30937

 

    

 

    

  Standard error of

 

the estimate

 

98.460     

  R2

 

0.97746     

  T-value a

 

7.978     

  T-value b

 

20.826     

 

    

 

 

 

 

 

 

 

 

Using the high-low method to estimate cost behavior, 410

 

maintenance hours in a month would mean the maintenance costs would

 

be budgeted at: (Round your intermediate calculations and final

 

answer to 2 decimal places.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$3,902.00.
$3,280.00.
$3,598.00.
$3,795.20.

 


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