The method of least squares was used to develop a cost equation to predict the cost of monthly equipment maintenance.The following computer output was received:

What was the cost formula for equipment maintenance?
A) total maintenance cost = $25 × machine hours
B) total maintenance cost = $32,000
C) total maintenance cost = $32,000 + ($25 × machine hours)
D) None of these are correct.

Question

The method of least squares was used to develop a cost equation to predict the cost of monthly equipment maintenance.The following computer output was received: ​
​
 What was the cost formula for equipment maintenance?
A) total maintenance cost = $25 × machine hours 
B) total maintenance cost = $32,000 
C) total maintenance cost = $32,000 + ($25 × machine hours) 
D) None of these are correct.

Quizplus · Accepted Answer

The cost formula developed using the method of least squares is expressed in the form y = a + bx, where y is the total maintenance cost, x is the number of machine hours, and a and b are constants. The computer output shows that the intercept a is $32,000 and the slope b is $25. Therefore, the cost formula is y = $32,000 + ($25 × machine hours). Option C is the only choice that matches this formula.

The Method of Least Squares Was Used to Develop a Cost