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.	$	4,250			500
Feb.		3,050			340
Mar.		3,650			420
Apr.		2,870			320
May		4,400			520
June		3,010			330
July		3,080			340
Aug.		4,520			540
Sept.		4,310			510
Oct.		4,100			490
Nov.		3,350			370
Dec.		3,210			360
Sum	$	43,800			5,040
Average	$	3,650		$	420
Average cost per hour				$	9.00
a (intercept)				$	588.89
b (coefficient)					7.2884
Standard error of the estimate					34.4689
R-squared					0.9972
t-value for b					60.105

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

rev: 12_02_2019_QC_CS-192345

Multiple Choice

• $3,684.

• $3,481.

• $3,701.

• $3,650.

• None of these answer choices are correct.