Answer to Question #66080 in Financial Math for Mage

Question

High-tex Engineering Company Limited wishes to set flexible budgets for each of its operating departments. A separate maintenance department performs all routine and major repair works on the company’s equipment and facilities. The company has determined that maintenance department performs all routine and major repair works on the company’s equipment and facilities. The company has determined that maintenance cost is primarily a function of machine hours worked in the various production departments.
The maintenance cost incurred and the actual machine hours worked during the months of January, February, March and April 2003 were as follows:



Required:
a) Determine the cost estimation function using:
i High-low method. (2 marks)
ii Regression analysis (2 marks)
b) Using the regression function estimate:
i The maintenance costs that would have been incurred if the machine hours were expected to be 900 in the month of May 2003. (1 mark)