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:

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

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:

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 equation is in the form of y = a + bx, where y represents the total cost of electricity, x represents the number of machine hours, a represents the fixed cost (intercept), and b represents the variable cost per machine hour (slope). Based on the coefficients provided, the fixed cost is $2,255 and the variable cost per machine hour is $9.48. Therefore, the cost formula for electricity cost is: Total cost = $2,255 + ($9.48 x machine hours). Therefore, the best choice is C.

Martin Company Makes Cell Phones