Burmer Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. Data regarding the machine hours and maintenance costs for the last year and the results of the regression analysis are as follows:A staff assistant has run regression analyses on the data and obtained the following output using Excel:
REGRESSION ANALYSIS
Y (Dependent) Variable: Maintenance Cost
X (Independent) Variable: Maintenance HoursThe 95% confidence range for a prediction of monthly manufacturing cost using the model is:
A) From $631 to $936
B) From $6.49 to $7.06
C) The range of +/- $47.06 around the predicted amount
D) The range of +/- $47.06 × 2 = $94.12 around the predicted amount

Question

Burmer Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. Data regarding the machine hours and maintenance costs for the last year and the results of the regression analysis are as follows:A staff assistant has run regression analyses on the data and obtained the following output using Excel:
REGRESSION ANALYSIS
Y (Dependent) Variable: Maintenance Cost
X (Independent) Variable: Maintenance HoursThe 95% confidence range for a prediction of monthly manufacturing cost using the model is:
A) From $631 to $936 
B) From $6.49 to $7.06 
C) The range of +/- $47.06 around the predicted amount 
D) The range of +/- $47.06 × 2 = $94.12 around the predicted amount

Quizplus · Accepted Answer

The 95% confidence interval for the predicted maintenance cost is the range of +/- ($47.06 × 2) = $94.12 around the predicted amount. Therefore, the correct answer is D. Choices A and B are incorrect because they do not take into account the confidence interval of the prediction. Choice C is also incorrect because it only gives a range and does not specify the actual predicted amount.

Burmer Co Has Accumulated Data to Use in Preparing Its Annual