NOT: 2 min.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

NOT: 2 min.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 regression coefficients show that the intercept (fixed cost) is $2,255 and the slope (variable cost per machine hour) is $9.48. Therefore, the cost formula for electricity cost is $2,255 + ($9.48 x number of machine hours).

NOT: 2 Min