Armer Company Is Accumulating Data to Use in Preparing Its

question 14

Multiple Choice

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

• A) 34.469/49.515.
• B) 0.99724.
• C) square root of 0.99724.
• D) (0.99724)².
• E) None of these answer choices are correct.

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Definitions:

Variable Costs

Costs that change in proportion to the level of output in the production process.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or output in the short run.

Marginal Cost

The expense associated with manufacturing an extra unit of a product or service.

Variable Cost

Variable cost pertains to a cost that changes in proportion with the level of activity or volume of production in a company.