Midgett Co

question 28

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 = 0.99743
r² = 0.99487
Using the high-low method, unit variable cost is calculated to be (round to the nearest cent) :

• A) $6.83.
• B) $8.67.
• C) $6.78.
• D) $7.88.
• E) $6.48.

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Definitions:

Historical Data

Information from the past used for analysis, including trends, to inform decision-making processes or predict future outcomes.

Estimated Data

Projections or approximations used in accounting and financial analysis to anticipate future results or values.

Corporate Finance

The division of finance dealing with how corporations address funding sources, capital structuring, and investment decisions.

CFO

Chief Financial Officer; a senior executive responsible for managing the financial actions of a company.