Armer Company is accumulating data to use 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 the use of linear regression 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 follow: If Armer Company uses the high-low method of analysis, the equation for the relationship between hours of activity and maintenance cost follows:
A) y = 400 + 9.0x
B) y = 570 + 7.5x
C) y = 3,600 + 400x
D) y = 570 + 9.0x
E) None of these answer choices are correct.

Question

Armer Company is accumulating data to use 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 the use of linear regression 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 follow: If Armer Company uses the high-low method of analysis, the equation for the relationship between hours of activity and maintenance cost follows:
A) y = 400 + 9.0x 
B) y = 570 + 7.5x 
C) y = 3,600 + 400x 
D) y = 570 + 9.0x 
E) None of these answer choices are correct.

Quizplus · Accepted Answer

The Answer of Armer Company is accumulating data to use 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 the use of linear regression 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 follow: If Armer Company uses the high-low method of analysis, the equation for the relationship between hours of activity and maintenance cost follows:
A) y = 400 + 9.0x 
B) y = 570 + 7.5x 
C) y = 3,600 + 400x 
D) y = 570 + 9.0x 
E) None of these answer choices are correct.

Armer Company Is Accumulating Data to Use in Preparing Its