Sympco Glass 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 1,380 $ 8,820
June 1,930 10,631
July 2,040 10,840
August 2,500 12,711
September 2,230 11,458
October 2,730 12,978
November 1,650 9,207
December 2,300 11,443
a. Use the high-low method to estimate a cost formula for repairs and maintenance. Round your answer for variable cost to the nearest cent. Use this rounded variable cost amount to calculate the fixed cost, and then round your answer for fixed cost to the nearest dollar.
b. Use least squares regression to estimate a cost formula for repairs and maintenance. You must use the least-squares formula provided in the chapter appendix to calculate the variable and fixed costs. Round your answers for b (the variable cost) and for a (the fixed cost) to the nearest cent. When solving the equation for a, round the value of b, y-bar, and x-bar to two decimal places.
c. Does the answer to (a) or to (b) provide the better estimate of the relationship between repairs and maintenance costs and machine hours?