Plot and comment on the estimated cost function

Reference no: EM131894921

Problem: High-low method.

Ken Howard, financial analyst at KMW Corporation, is examining the behavior of quarterly maintenance costs for budgeting purposes. Howard collects the following data on machine-hours worked and maintenance costs for the past 12 quarters:

Quarter	Machine-Hours	Maintenance Costs
1	100,000	$205,000
2	120,000	240,000
3	110,000	220,000
4	130,000	260,000
5	95,000	190,000
6	115,000	235,000
7	105,000	215,000
8	125,000	255,000
9	105,000	210,000
10	125,000	245,000
11	115,000	200,000
12	140,000	280,000

1. Estimate the cost function for the quarterly data using the high-low method.

2. Plot and comment on the estimated cost function.

3. Howard anticipates that KMW will operate machines for 100,000 hours in quarter 13. Calculate the predicted maintenance costs in quarter 13 using the cost function estimated in requirement 1.

Reference no: EM131894921

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