Based on the data derived from the regression analysis, 420 maintenance hours in a month mean that maintenance costs should be budgeted to the nearest dollar at

a. $3,780

b. $3,461

c. $3,797

d. $3,746

e. None of the above

(CMA Adapted)

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 analysisfollow:

Hours of Activity 480 320 400 300 500 310 320 520 490 470 Maintenance Costs January February March April May June July August September October November December $ 4,200 3,000 3,600 2,820 4,350 2,960 3,030 4,470 4,260 4,050 3,300 3,160 $43,200 3,600 340 Total 4,800 Average 400 Average cost per hour ($43,200/4,800) $9.00 a (intercept) b coefficient Standard error of the estimate R-squared t-value for b 684.65 7.2884 34.469 99724 60.105