Question :

Wilkens Company wants to evaluate the cost behavior pattern of maintenance costs. Wilkens has decided to use linear regression by employing the equation y = a + bx for maintenance costs. The prior year's data regarding maintenance hours and costs, and the results of the regression analysis are provided in the data below.

Hours of Activity               Maintenance Costs

January                480        4,200

February              320        3,000

March   400        3,600

April       300        2,820

May       500        4,350

June      310        2,960

July        320        3,030

August  520        4,470

September         490        4,260

October               470        4,050

November          350        3,300

December           340        3,160

Total      4,800     $43,200

Average               400 $ 3,600

Average cost per hour $9.00

A             684.65

b             7.2884

Standard error of a          49.515

Standard error of b         0.12126

Standard error of the estimate 34.469 r 0.99724

a. Refer to the Wilkens Corporation. Based upon the data derived from the regression analysis, evaluate maintenance costs should be budgeted for a month in which 420 maintenance hours may be worked?

b. Determine the percentage of the total variance that will be explained by the regression equation?