Texoma Trucking Company is exploring different prediction models that can be used to forecast indirect labor costs.One independent variable under consideration is machine hours.Following are matching observations on indirect labor costs and machine hours for the past six months:

Month Machine hours Indirect labor costs

1 300 $20,000

2 400 $24,000

3 240 $17,000

4 370 $22,000

5 200 $13,000

6 225 $14,000

In a high-low model,which months' observations would be used to compute the model's parameters? A)2 and 5 B)1 and 6 C)2 and 6 D)4 and 5

Question

Texoma Trucking Company is exploring different prediction models that can be used to forecast indirect labor costs.One independent variable under consideration is machine hours.Following are matching observations on indirect labor costs and machine hours for the past six months:

Month	Machine hours	Indirect labor costs
1	300	$20,000
2	400	$24,000
3	240	$17,000
4	370	$22,000
5	200	$13,000
6	225	$14,000

In a high-low model,which months' observations would be used to compute the model's parameters? A)2 and 5 B)1 and 6 C)2 and 6 D)4 and 5

Quizplus · Accepted Answer

The high-low method uses the observations with the highest and lowest values of the independent variable to compute the model's parameters. In this case, the highest machine hours are 400 (Month 2) and the lowest are 200 (Month 5).

Texoma Trucking Company Is Exploring Different Prediction Models That Can