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 Hours
Using regression analysis, what is the estimated maintenance expense for a month that the firm expects to operate 600 machine hours (round to nearest whole dollar)?
A) $88.
B) $4,050.
C) $4,850.
D) $6,934.

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 Hours
Using regression analysis, what is the estimated maintenance expense for a month that the firm expects to operate 600 machine hours (round to nearest whole dollar)?
A) $88. 
B) $4,050. 
C) $4,850. 
D) $6,934.

Quizplus · Accepted Answer

The regression equation is Y = a + bX, where:
Y = maintenance cost
X = maintenance hours

From the regression analysis, we know that:
a = 650
b = 7.5

To estimate the maintenance expense for a month that the firm expects to operate 600 machine hours, we need to plug in X = 600 into the regression equation:

Y = 650 + 7.5(600) = $4,850 (rounded to nearest whole dollar)

Therefore, the best choice is C, $4,850.

Burmer Co Has Accumulated Data to Use in Preparing Its Annual