Determine the break down of the mixed costs

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Question - The maintenance costs of a college department are listed below. The Controller wishes to use service hours as a cost driver for planning purposes.

Month

Service Hours

Maintenance Cost

Jan

525

$4,710

Feb

505

4,310

Mar

310

2,990

Apr

495

4,200

May

315

3,000

Jun

485

4,215

Jul

315

2,950

Aug

405

3,680

Sep

475

4,100

Oct

345

3,250

Nov

350

3,260

Dec

335

3,015

Totals

4,860

$43,680

Required -

1. Use the high/low method to determine the break down of the mixed costs. Express the cost in the format Y=a + bx Explain each of the terms.

Use this formula to show the maintenance costs for a month in which there were 450 service hours

2. A regression analysis was done on the above data, with the following results:

INTERCEPT = 655.92

SLOPE = 7.368

R2 = 0.983451

Use this information to show maintenance costs for the month with 450 service hours. Explain the value of the R2.

3. Explain the difference between the two results.

4. Which method would you use for planning purposes? Why? Why would you not use the other method?

Reference no: EM132779889

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