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V appendix 3 use and interpretation of least squares

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V. Appendix 3: Use and Interpretation of Least-Squares Regression This appendix provides an example of the use of computer spreadsheet regression commands to perform simple linear regression. Plotting the data and the possible elimination of outliers are discussed. A data set with two possible cost drivers is presented (see EXHIBIT 3-7 ) and the output from the regression commands is presented. The R 2 values of two regression equations are compared to see which regression equation best fits the data. Caution is provided because the assumptions of regression analysis should be examined to ensure that the data comply so that useful results can be obtained. Regression Assumptions – (1) Linearity within the relevant range; (2) Constant variance of residuals; (3) Independence of residuals; and (4) Normality of residuals. 37
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CHAPTER 3: Quiz/Demonstration Exercises Learning Objective 1 1. A cost that changes abruptly at intervals of activity because the resources and the costs come in indivisible chunks is called a(n) _____ cost. a. indivisible b. mixed c. activity d. step 2. The portion of a mixed cost that remains constant per unit with activity within the relevant range. a. indivisible b. fixed c. variable d. step Learning Objective 2 3. Managers influence cost behavior through their _____. a. technology decisions b. product and service decisions c. capacity decisions d. all of these e. only A and B 4. One of the following costs is an example of a discretionary fixed cost. a. investment in production equipment b. investment in the factory c. electricity costs d. research and development costs e. raw material purchases 38
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Learning Objective 3 5. In the cost function equation Y = F + VX, V represents the _____. a. total cost at the X level of activity b. fixed cost at the Y level of activity c. variable cost per unit of activity X d. variable cost at the F level of activity 6. In the cost function equation Y = F + VX, F represents the _____. a. slope b. intercept c. dependent variable d. independent variable Learning Objective 4 7. Which of the following may use activity analysis? a. Apple Inc. b. Google c. Price Waterhouse, Coopers LLP (international auditing, tax, and consulting firm) d. only A and B e. only C f. A, B, and C d 8. Activity analysis provides cost drivers for cost functions. The cost functions should _____. a. predict costs b. be plausible c. be reliable d. have benefits that outweigh the costs e. A, B, C, and D e f. only A and D g. only A, C, and D 39
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Learning Objective 5 9. The cafeteria department at Olmstead Center incurred the following costs for September 20x7: Monthly Cost September 20x7 Amount Manager's salary $ 9,000 Hourly workers' wages and benefits 28,000 Food 12,000 Equipment depreciation and rental 11,000 Supplies 4,000 Total cafeteria costs $64,000 The cafeteria served 12,500 meals during the month. Using an account analysis to classify costs, the cost function for Olmstead's cafeteria department is _____ per meal. a. $20,000 + $3.52 b. $20,000 + $1.62 c. $44,000 + $1.60 d. $44,000 + $3.52 Use the following information for questions 10 through 12.
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