Midgett Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff suggested that linear regression be employed 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 are as follows:

Month	Maintenance Cost				Machine Hours
Jan.	$	5,030				540
Feb.		3,630				360
Mar.		4,400				560
Apr.		3,341				350
May		5,235				650
June		3,350				370
July		3,713				500
Aug.		5,345				770
Sept.		5,122				570
Oct.		4,856				660
Nov.		3,949				360
Dec.		3,810				420
Sum	$	51,781				6,110
Average	$	4,315.08				509.17

Average cost per hour ($51,781/6,110) = $8.47 (rounded to the nearest cent)

r = 0.89170

r² = 0.79513

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

Multiple Choice

• 79.554%.

• 49.403%.

• 60.782%

• 79.513%.

• 79.375%.