The McGraw Company Is Accumulating Data to Be Used in Preparing

question 20

Multiple Choice

The McGraw Company is accumulating data to be used 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 that linear regression be employed to derive an equation in the form of y = a + bx for maintenance costs.Data regarding the maintenance hours and costs for last year and the results of the regression analysis are as follows: (CMA adapted)

What would be the cost equation if the high-low method is used?

• A) Maintenance Costs = 9.00 × Hours of Activity.
• B) Maintenance Costs = 3,600 + 400 × Hours of Activity.
• C) Maintenance Costs = 570 + 7.50 × Hours of Activity.
• D) Maintenance Costs = 34.469 + .99724 × Hours of Activity.

---

Definitions:

Emotionality

An individual's capacity to experience and express emotions.

Minnesota Study

Refers to a landmark series of psychological studies conducted at the University of Minnesota focusing on various aspects of human behavior, personality, and health.

Identical Twins

Twins who are genetically identical, resulting from the fertilization of a single egg that splits into two.

Fraternal Twins

Twins that develop from two different eggs fertilized by two different sperm, making them genetically similar as ordinary siblings rather than identical.