Midgett Co

question 35

Multiple Choice

Midgett Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff suggested that linear regression be employed 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 are as follows:Average cost per hour ($51,840/6,270) = $8.27 (rounded to the nearest cent)
r = 0.99821
r²= 0.99780
Using the high-low method, total maintenance cost for 600 hours is calculated to be (round to the nearest dollar) :

• A) $5,293.
• B) $4,777.
• C) $5,528.
• D) $4,755.
• E) $5,656.

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Definitions:

Break-even Point

The point at which total revenues equal total costs and expenses, leaving no net loss or gain.

Margin of Safety

The difference between actual or expected sales and the sales level at which a company breaks even, providing a buffer against losses.

Unit Selling Price

The amount of money charged for one unit of a product or service.

Break-even Point

The point at which total costs equal total revenue, meaning no profit or loss is generated.