The Armer Company Is Accumulating Data to Be Used in Preparing

question 22

Multiple Choice

The Armer 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) Using the high-low method to estimate cost behavior,420 maintenance hours in a month would mean the maintenance costs would be budgeted at:

• A)$3,150.
• B)$3,600.
• C)$3,720.
• D)$3,780.

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Definitions:

Dealer

An individual or firm involved in the business of buying and selling securities for their own account or for others.

Agency Costs

Costs arising from the conflict of interest between a principal (such as a shareholder) and an agent (such as a company manager), including monitoring and contracting costs.

Moral Hazard

A situation in economics where one party can take risks because they do not bear the full consequences of their actions, often due to asymmetric information or a disconnect between actions and consequences.

Information Gathering

The process of collecting data and information from various sources to make informed decisions or understand situations better.