Interpreting Regression Results-Multiple- Choice (Appendix): Armer Company is accumulating data to prepare its annual profit plan for the coming year. The behavior pattern of the maintenance costs must be determined. The accounting staff has suggested that regression be employed to derive an equation in the form of y = a + bx for maintenance costs. Data regarding maintenance-hours and costs for last year and the results of the regression analysis are as follows:

Required:

a. In the standard regression equation of y = a + bx, the letter b is best described as the:

(1) Independent variable. (2) Dependent variable. (3) Constant coefficient. (4) Variable cost coefficient. (5) Coefficient of determination.

b. The letter y in the standard regression equation is best described as the:

(1) Independent variable. (2) Dependent variable. (3) Constant coefficient. (4) Variable coefficient. (5) Coefficient of determination

c. The letter .v in the standard regression equation is best described as the:

(1) Independent variable. (2) Dependent variable. (3) Constant coefficient. (4) Variable coefficient. (5) Coefficient of determination.

d. If the Armer Company uses the high-low method of analysis, the equation for the relationship between hours of activity and maintenance cost would be:

(1) v = 400 + 9.0.v. (2) v = 570 + 7.5*. (3) y = 3,600 + 400.v. (4) y = 570 + 9.0.v. (5) Some other equation.

e. Based upon the data derived from the regression analysis, 420 maintenancehours in a month would mean the maintenance would be budgeted at:

(1) $3,780. (2) $3,461. (3) $3,797. (4) $3,746. (5) Some other amount.

f. The coefficient of correlation for the regression equation for the maintenance activities is:

(1) 34.469 h- 49.515. (2) .99724. (3) V.99724. (4) (.99724)2 . (5) Some other amount.

g. The percent of the total variance that can be explained by the regression equation is:

(1) 99.724%. (2) 69.613% (3) 80.982%. (4) 99.862%. (5) Some other amount.

h. (Appendix) What is the range of values for the marginal maintenance cost such that Armer can be 95 percent confident that the true value of the marginal maintenance cost will be within this range? (Use / = 2.23.)

(1) $7.02-$7.56.

(2) $7.17-$7.41.

(3) $7.07-$7.51. (4) $6.29-$8.29. (5) Some other range.

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 Sum 4,800 43,200 Average 400 3,600 Average cost per hour (43,200 4,800) = $9 Intercept b coefficient Standard error of the intercept Standard error of the b coefficient Standard error of the regression R-squared t-value intercept t-value b 684.65 7.2884 49.515 .12126 34.469 .99724 13.827 60.105