The McGraw Company Is Accumulating Data to Be Used in Preparing

question 55

Multiple Choice

The McGraw Company is accumulating data to be used 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 that linear regression be employed to derive an equation in the form of y = a + bx for maintenance costs. Data regarding the maintenance hours and costs for last year and the results of the regression analysis are as follows: (CMA adapted) $$\begin{array} { l r c } & \begin{array} { c } \text { Hours of } \\\text { Activity }\end{array} & \begin{array} { c } \text { Maintenance } \\\text { Costs }\end{array} \\\text { January } & 480 & \$ 4,200 \\\text { February } & 320 & 3,000 \\ \text { March } & 400 & 3,600 \\\text { April }& 300 & 2,820 \\\text { May } & 500 & 4,350 \\\text { June }& 310 & 2,960 \\\text { July } & 320 & 3,030 \\\text { August } & 520 & 4,470 \\\text { September } & 490 & 4,260 \\\text { October } & 470 & 4,050 \\\text { November } & 350 & 3,300 \\\text { December }& 340 & 3,160 \\ \text { Sum } & 4,800 & \$ 3,200 \\ \text { Average }& 400 & 3,600 \\\text { A coefficient } & & 684.65 \\\text { B coefficient } & & 7.2884 \\\text { Standard error of the a coefficient } & 49.515 & \\\text { Standard error of the b coefficient } & 0.12126 & \\\text { Standard error of the estimate } & & 34.469 \\\mathrm { R } ^ { 2 } & & 0.99724 \\\text { T-value a } & & 13.827 \\\text { T-value b } & & 60.105\end{array}$$
-What is the variable cost per hour using the high-low method to estimate the cost equation?

• A) $9.00.
• B) $7.50.
• C) $0.1333.
• D) $0.1111.

---

Definitions:

Tactical Plan

A short-term strategy designed to address specific goals, often as part of a broader strategic plan.

Tactical Plans

Short-term actions designed to achieve specific objectives, often as part of a larger strategic plan.

Strategic Plans

Long-term, comprehensive blueprints for how an organization will achieve its goals and meet the expectations of its stakeholders.

Work Methods

The strategies, techniques, or processes employed by individuals or groups to carry out their tasks, often optimized for efficiency, quality, or safety.