Armer Company Is Accumulating Data to Use in Preparing Its

question 29

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: If Armer Company uses the high-low method of analysis, the equation for the relationship between hours of activity and maintenance cost follows:

• A) y = 400 + 9.0x
• B) y = 570 + 7.5x
• C) y = 3,600 + 400x
• D) y = 570 + 9.0x
• E) None of these answer choices are correct.

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Definitions:

Financial Policies

Guidelines and rules that govern a company's financial decision-making process and its pursuit of financial objectives.

Growth Achievement

The measure of progress or success in reaching specific growth targets, often related to personal development, business expansion, or economic indicators.

Dividend Payout Ratio

A financial ratio that shows the proportion of earnings a company pays out to shareholders in the form of dividends.

Internal Growth Rate

The growth rate a firm can maintain with only internal financing.