Figure 3-7. Margola Company produces hand-held calculators.The company controller wanted to calculate the fixed and variable costs associated with the maintenance cost incurred by the factory.Data for the past four months were collected.
Coefficients shown by a regression program are:
Refer to Figure 3-7.Using the results of regression,the cost formula for maintenance cost was
A)$1,150 ´ machine hours
B)($4,686 - $3,956)/(386 - 310)
C)$9.06 ´ machine hours
D)$1,150 + ($9.06 ´ machine hours)

Question

Figure 3-7. Margola Company produces hand-held calculators.The company controller wanted to calculate the fixed and variable costs associated with the maintenance cost incurred by the factory.Data for the past four months were collected.
 Coefficients shown by a regression program are:
 Refer to Figure 3-7.Using the results of regression,the cost formula for maintenance cost was
A)$1,150 ´ machine hours 
B)($4,686 - $3,956)/(386 - 310) 
C)$9.06 ´ machine hours 
D)$1,150 + ($9.06 ´ machine hours)

Quizplus · Accepted Answer

The cost formula for maintenance cost given by the regression program is $1,150 + ($9.06 ´ machine hours), which represents the fixed cost of $1,150 and the variable cost of $9.06 per machine hour. Therefore, the best choice is D as it accurately reflects this cost formula.