Question : Objective 10.A 1) The coefficient of determination important in explaining variances : 1211748

 

Objective 10.A

 

1) The coefficient of determination is important in explaining variances in estimating equations. For a certain estimating equation, the unexplained variation was given as 22,506. The total variation was given as 51,150. What is the coefficient of determination for the equation?

A) 0.34

B) 0.43

C) 0.56

D) 0.75

2) The Perize Corporation used regression analysis to predict the annual cost of indirect materials. The results were as follows:

 

Indirect Materials Cost Explained by Units Produced

Constant$15,685

Standard error of Y estimate$3,500

r20.7832

Number of observations20

X coefficient(s)10.25

Standard error of coefficient(s)2.1876

 

A) Y = $15,685 + $10.25X

B) Y = $3,500 + $5.15X

C) Y = $19,185 + $4.48X

D) Y = $12,285 + $10.25X

 

3) Corise’s Cola was to manufacture 500 cases of cola next week. The accountant provided the following analysis of total manufacturing costs.

 

VariableCoefficientStandard Errort-Value

Constant11582.731.39

Independent variable230105.502.18

r2 = 0.82

 

What is the estimated cost of producing the 500 cases of cola?

A) $115,115

B) $57,730

C) $24,380

D) $9,744

4) Midose’s Stables used two different independent variables (trainer hours and number of horses) in two different equations to evaluate the cost of training horses. The most recent results of the two regressions are as follows:

 

Trainer’s hours:

VariableCoefficientStandard Errort-Value

Constant$1,004.65$217.934.61

Independent Variable$22.99$3.237.11

r2 = 0.56

 

Number of horses:

VariableCoefficientStandard Errort-Value

Constant$5,240.95$1,180.404.44

Independent Variable$951.48$271.853.50

r2 = 0.63

 

What is the estimated total cost for the coming year if 15,000 trainer hours are incurred and the stable has 350 horses to be trained, based upon the best cost driver?

A) $96,327.90

B) $338,258.95

C) $345,854.65

D) $14,277,440.95

 

5) A major concern that arises with multiple regression is multicollinearity, which exists when ________.

A) the dependent variable is not normally distributed

B) the standard errors of the coefficients of the individual variables decrease

C) the R2 statistic is low

D) two or more independent variables are highly correlated with one another

6) In multiple regression, when two or more independent variables are highly correlated with one another, the situation is known as ________.

A) heteroscedasticity

B) homoscedasticity

C) multicollinearity

D) autocorrelation

 

7) Which of the following is the mathematical expression to calculate the coefficient of determination?

A) Coefficient of determination = 1 – (Unexplained variation / Total variation)

B) Coefficient of determination = (1 + Total variation ) / Unexplained variation)

C) Coefficient of determination = (1 – Unexplained variation ) / Total variation)

D) Coefficient of determination = 1 – Unexplained variation + Total variation)

 

8) The coefficient of determination (r2) measures the percentage of variation in X (the independent variable) explained by Y (the dependent variable).

 

9) Generally a coefficient of determination (r2) of 0.30 or higher passes a goodness of fit test.

 

10) Goodness of fit has meaning only if the relationship between the cost drivers and costs is economically plausible.