Midgett Co

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:Average cost per hour ($51,840/6,270) = $8.27 (rounded to the nearest cent)
r = 0.99743
r² = 0.99487
Using the high-low method, unit variable cost is calculated to be (round to the nearest cent) :

A) $6.83.
B) $8.67.
C) $6.78.
D) $7.88.
E) $6.48.

Correct Answer:

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