Armer Company 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:

Month Maintenance Cost Machine Hours

Jan. $ 4,600 640

Feb. 3,400 480

Mar. 4,000 560

Apr. 3,220 460

May 4,750 660

June 3,360 470

July 3,430 480

Aug. 4,870 700

Sept. 4,660 650

Oct. 4,450 630

Nov. 3,700 510

Dec. 3,560 500

Sum $ 48,000 6,740

Average $ 4,000 $ 562

Average cost per hour $ 7.00

a (intercept) $ 38.71

b (coefficient) 7.0527

Standard error of the estimate 52.847

R-squared 0.99351 t-value for b 39.1300

At 400 hours of activity, Armer management can be approximately two-thirds confident that the maintenance costs will be in the range of

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Multiple Choice

$2,757.41 to $2,962.17.

$2,758.39 to $2,961.16.

$2,811.48 to $2,908.22.

$2,806.94 to $2,912.64.

None of these answer choices are correct.