Vanco Industries wanted to determine the relationship between its monthly operating costs and a potential cost driver, machine hours. The output of a regression analysis showed the following information (Note: only a portion of the regression analysis results is presented here.)
-At Vanco Industries, what is the cost equation based upon the results of the regression analysis?
A) y = $0.90x
B) y = $0.90 + $2,413.21
C) y = $2,413.21x + $0.90
D) y = $2,413.21 + $0.90x

Question

Vanco Industries wanted to determine the relationship between its monthly operating costs and a potential cost driver, machine hours. The output of a regression analysis showed the following information (Note: only a portion of the regression analysis results is presented here.) 
-At Vanco Industries, what is the cost equation based upon the results of the regression analysis?
A) y = $0.90x 
B) y = $0.90 + $2,413.21 
C) y = $2,413.21x + $0.90 
D) y = $2,413.21 + $0.90x

Quizplus · Accepted Answer

The cost equation should have the form y = a + bx, where y is the monthly operating cost, x is the number of machine hours, a is the fixed cost component, and b is the variable cost per unit of the cost driver. The results of the regression analysis show that the intercept (a) is $2,413.21 and the slope (b) is $0.90. Therefore, the cost equation is y = $2,413.21 + $0.90x.

Vanco Industries Wanted to Determine the Relationship Between Its Monthly