Wilkens Company wants to determine the cost behavior pattern of maintenance costs. Wilkens has decided to use linear regression by employing the equation y = a + bx for maintenance costs. The prior ye
Wilkens Company wants to determine the cost behavior pattern of maintenance costs. Wilkens has decided to use linear regression by employing the equation y = a + bx for maintenance costs. The prior year’s data regarding maintenance hours and costs, and the results of the regression analysis are given in the data below.
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 $9.00
A 684.65
b 7.2884
Standard error of a 49.515
Standard error of b 0.12126
Standard error of the estimate 34.469
r 0.99724
“R-SQUARED” 0.99448
a. Refer to the Wilkens Company. Based upon the data derived from the regression analysis, what maintenance costs should be budgeted for a month in which 420 maintenance hours will be worked?
b. Refer to the Wilkens Company. What is the percentage of the total variance that can be explained by the regression equation?
