(High–low; least squares regression) Green Shade manufactures insulated
windows. The firm’s repair and maintenance (R&M) cost is mixed and varies most directly with machine hours worked. The following data have been gathered from recent operations:
|
Month |
MHs |
R&M Cost |
|
May |
1,400 |
$ 9,000 |
|
June |
1,900 |
10,719 |
|
July |
2,000 |
10,900 |
|
August |
2,500 |
13,000 |
|
September |
2,200 |
11,578 |
|
October |
2,700 |
13,160 |
|
November |
1,700 |
9,525 |
|
December |
2,300 |
11,670 |
a. Use the high–low method to estimate a cost formula for repairs and maintenance.
b. Use least squares regression to estimate a cost formula for repairs and maintenance.
c. Does the answer to part (a) or to part (b) provide the better estimate of the relation ship between repairs and maintenance costs and machine hours? Why?