Figure 3-8. Martin Company makes cell phones.The company controller wanted to calculate the fixed and variable costs associated with electricity use in the factory.Data for the past four months were collected.
Coefficients shown by a regression program are:
Refer to Figure 3-8.Using the results of regression,the cost formula for electricity cost was
A)$9.48 ´ machine hours
B)$2,255 ´ machine hours
C)$2,255 + ($9.48 ´ machine hours)
D)none of these are correct

Question

Figure 3-8. Martin Company makes cell phones.The company controller wanted to calculate the fixed and variable costs associated with electricity use in the factory.Data for the past four months were collected.
 Coefficients shown by a regression program are:
 Refer to Figure 3-8.Using the results of regression,the cost formula for electricity cost was
A)$9.48 ´ machine hours 
B)$2,255 ´ machine hours 
C)$2,255 + ($9.48 ´ machine hours) 
D)none of these are correct

Quizplus · Accepted Answer

The coefficient of the machine hours variable is $9.48, indicating that electricity cost increases by $9.48 for every additional machine hour used. The intercept coefficient is $2,255, indicating that there is a fixed cost component to electricity use. Therefore, the cost formula for electricity cost is C) $2,255 + ($9.48 ´ machine hours).