High-low method or regression analysis


James is trying to determine if there is a relationship between machine hours and utility costs. He has gathered financial information from the last six months as follows:

Month Machine Hours Utility Costs

1 2000 900

2 2800 1420

3 3200 1200

4 3000 1200

5 2200 1300

6 2400 1000

Required:

A. Using either the high-low method or regression analysis, determine the equation for a line. (Note: You will receive 5 extra credit points if you use regression analysis.)

B. James believes that in month 7 the machine hour volume will be 3600 hours. Determine the expected utility cost.

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Accounting Basics: High-low method or regression analysis
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