Armer Company Is Accumulating Data to Use in Preparing Its

question 95

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:Based on the data derived from the regression analysis, 420 maintenance hours in a month mean that maintenance costs should be budgeted to the nearest dollar at

• A) $3,780.
• B) $3,461.
• C) $3,797.
• D) $3,746.
• E) None of these answer choices are correct.

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Definitions:

Straight-Line Depreciation

A method of calculating the depreciation of an asset, which allocates an equal amount of the asset’s cost to each year of its useful life.

Residual Value

The projected worth of an asset at the conclusion of its service life, considering the deductions for depreciation.

Useful Life

The estimated period a fixed asset is expected to be useful for its intended purpose, affecting depreciation calculations.

Double Declining Balance

An accelerated method of depreciation which doubles the rate at which an asset is depreciated compared to the straight-line method.