Clough Company is interested in establishing the relationship between utility costs and machine hours. Data have been collected and a regression analysis prepared using Excel. The monthly data and the regression output follow:MonthMachine HoursUtilityCostsJanuary3,250$22,080 February3,770 25,200 March2,470 16,200 April4,030 27,600 May4,940 33,900 June4,290 26,400 July5,330 29,700 August4,550 27,300 September2,600 18,600 October4,810 31,200 November6,110 37,200 December5,460 33,300 SUMMARY OUTPUTRegression StatisticsMultiple R96.5%R Square93.2%Adjusted R-Square92.5%Standard Error1,710.21 Observations12.00 CoefficientsStandard Errort StatP-valueLower 95%Upper 95%Intercept4,472.262,019.392.210.051-27.238971.74Machine
Hours5.3290.45511.703.69E-074.3146.343Required:(a.) What is the equation for utility costs using the regression analysis?(b.) Does the variable "machine hours" have statistical significance? Explain.(c.) Prepare an estimate of utility costs for a month when 3,000 machine hours are worked.
What will be an ideal response?
(a.)
$4,472.26 + ($5.329 × machine hours)
(b.)
Yes, the t-stat of 11.70 exceeds the general rule of thumb of 2.
(c.)
$4,472.26 + ($5.329 × 3,000) = $20,459.26
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