Thane Company is interested in establishing the relationship
between electricity costs and machine hours. Data have been
collected and a regression analysis prepared using Excel. The
monthly data and the regression output follow:
Month 
Machine Hours 
Electricity Costs 

January 
3,500 
$ 
18,900 

February 
3,900 
$ 
22,000 

March 
2,900 
$ 
14,000 

April 
4,100 
$ 
24,000 

May 
4,800 
$ 
28,750 

June 
4,300 
$ 
23,000 

July 
5,500 
$ 
25,250 

August 
4,500 
$ 
23,250 

September 
3,000 
$ 
16,500 

October 
4,700 
$ 
27,000 

November 
6,800 
$ 
32,000 

December 
6,000 
$ 
28,250 

Summary Output 

Regression Statistics 

Multiple R 
.919 
R Square 
.844 
Adjusted R^{2} 
.829 
Standard Error 
2,165.73 
Observations 
12.00 
Coefficients 
Standard Error 
t Stat 
Pvalue 
Lower 95% 
Upper 95% 

Intercept 
5,084.31 
2,589.60 
1.96 
0.08 
(685.68) 
10,854.29 
Machine Hours 
4.11 
0.56 
7.36 
0.00 
2.86 
5.35 
If the controller uses highlow method to estimate costs, the cost
equation for electricity cost is:( Round intermediate calculations
to 2 decimal places)
Multiple choice:
Highest electricity cost is $ 32000 in the month of november for which machine hours given is 6800.
Lowest electricity cost is $ 14000 in the month of march for which machine hours given is 2900.
The cost equation for electricity cost is :
variable cost portion calculation :
( 32000  14000 ) / ( 6800  2900 ) =
18000 / 3900 = $ 4.62 * machine hours
fixed cost portion calculation :
32000  [ 6800 * 4.62 ] = $ 584
The cost equation for electricity cost is :$584 + (4.62 * machinehours)
Option C is correct.
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