Question

Ken Howard, financial analyst at QTY Corporation, is examining the behavior of quarterly maintenance costs for budgeting purposes. Howard collects the following data on machine-hours worked and maintenance costs for the past 12 quarters.


1. Estimate the cost function for the quarterly data using the high– low method.
2. Plot and comment on the estimated cost function.
3. Howard anticipates that QTY will operate machines for 75,000 hours in quarter 13. Calculate the predicted maintenance costs in quarter 13 using the cost function estimated in requirement 1.
4. Would there be much value to estimating the cost function using the regression method instead of the high– low method used in requirement 1?Explain.


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  • CreatedJanuary 15, 2015
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