Question

The method of least squares was used to develop a cost equation to predict the cost of monthly equipment maintenance. The following computer output was received:Intercept40,000Slope20The driver used was the number of machine hours.Using the cost formula for the equipment maintenance cost, what is the predicted cost of equipment maintenance for April, assuming that 8,000 machine hours will be logged in April?
a. $140,000
b. $200,000
c. $185,000
d. None of these choices are correct.

Answer 1

Answer:

correct option is b. $200,000

Explanation:

given data

Intercept = 40,000

Slope = 20

machine hours X = 8000

to find out

what is the predicted cost of equipment maintenance for April

solution

we will use here least square equation that  will be

Y = intercept + Slope ×  X      ............................1

here Y is cost of maintenance  and X is maintenance hours

so put here value we get from equation 1

Y = 40000 +  ( 20 ×   8000 )

Y = 40000 + 160000

Y = 200000

so  predicted cost of equipment maintenance for April is 200000

correct option is b. $200,000