Question:
(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?