Meleski Corporation's recent utility costs are listed below: Management believes that utility cost is a mixed cost that depends on machine-hours.
-Using the least-squares regression method, the estimate of the fixed component of utility cost per month is closest to:
A) $4,649
B) $5,028
C) $16,975
D) $16,850

Question

Meleski Corporation's recent utility costs are listed below:  Management believes that utility cost is a mixed cost that depends on machine-hours.
-Using the least-squares regression method, the estimate of the fixed component of utility cost per month is closest to:
A) $4,649 
B) $5,028 
C) $16,975 
D) $16,850

Quizplus · Accepted Answer

Using the least-squares regression method, we can estimate the fixed component of utility cost per month by finding the y-intercept of the regression line. From the given data, we can calculate the regression equation:

Total cost = Fixed cost + Variable cost * Machine hours

Using regression analysis, we get:

Fixed cost = $5,028
Variable cost = $3.25 per machine hour

Therefore, the best answer is B) $5,028, which represents the estimate of the fixed component of utility cost per month.

Meleski Corporation's Recent Utility Costs Are Listed Below: Management