Regression Analysis Problems 8-42 through 8-46 are based on Armer Company, which 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:
| Hours of Activity | Maintenance Costs |
January | 480 | $ 4,200 |
February | 320 | 3,000 |
March | 400 | 3,600 |
April | 300 | 2,820 |
May | 500 | 4,350 |
June | 310 | 2,960 |
July | 320 | 3,030 |
August | 520 | 4,470 |
September | 490 | 4,260 |
October | 470 | 4,050 |
November | 350 | 3,300 |
December | 340 | 3,160 |
Total | 4,800 | $43,200 |
Average | 400 | 3,600 |
Average cost per hour ($43,200/4,800) = $9.00 |
|
a (intercept) | 684.65 |
b coefficient | 7.2884 |
Standard error of the estimate | 34.469 |
R-squared | .99724 |
t-value for b | 60.105 |
Required The percent of the total variance that can be explained by the regression equation is
a. 99.724%
b. 69.613%
c. 80.982%
d. 99.862%
e. None of the above
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