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Armer Company is accumulating data to use in preparing its annual profit plan for the...

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Accounting

Armer Company is accumulating data to use in preparing its annual profit plan for the coming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff has suggested the use of linear regression to derive an equation for maintenance hours and costs. Data regarding the maintenance hours and costs for the last year and the results of the regression analysis follow:

Month Maintenance Cost Machine Hours
Jan. $ 4,500 600
Feb. 3,300 440
Mar. 3,900 520
Apr. 3,120 420
May 4,650 620
June 3,260 430
July 3,330 440
Aug. 4,770 660
Sept. 4,560 610
Oct. 4,350 590
Nov. 3,600 470
Dec. 3,460 460
Sum $ 46,800 6,260
Average $ 3,900 $ 522
Average cost per hour $ 7.00
a (intercept) $ 220.82
b (coefficient) 7.0527
Standard error of the estimate 52.847
R-squared 0.9935
t-value for b 39.130

The coefficient of determination for Armer's regression equation for the maintenance activities is

Multiple Choice

  • 52.847/95.255.

  • 0.9935.

  • square root of 0.9935.

  • (0.9935)2.

  • None of these answer choices are correct.

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