Refer to the Following:
a Consulting Firm Estimates the Following $Q _ { t } = a + b t + c D$

question 60

Multiple Choice

Refer to the following:
A consulting firm estimates the following quarterly sales forecasting model:
$Q _ { t } = a + b t + c D$
The equation is estimated using quarterly data from 2003I-2013III (t = 1,..., 43) . The variable D is a dummy variable for the second quarter where:
D = 1 in the second quarter, and 0 otherwise.
The results of the estimation are:
$\begin{array}{rllll}\text { DEPENDENT VARIABLE: } & \text { QT } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ONF } \\\text { OBSERVATIONS: } & 43 & 0.8644 & 127.5 & 0.0001\\\\\text { VARIABLE } & \text { PARAMETER } & \text { STANDARD } & \\&\text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & 22.5 & 9.32 & 2.41 & 0.0201 \\\text { T } & 1.86 & 0.55 & 3.38 & 0.0016 \\\text { D } & 2.0 & 0.71 & 2.82 & 0.0075\end{array}$
-Using the estimated trend line, what is the predicted level of sales in 2014I ?

• A) 110.06
• B) 106.20
• C) 104.34
• D) 102.2
• E) none of the above

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Definitions:

Break-even Point

The point at which total expenses match total income, leading to neither a loss nor a profit.

Unit Variable Cost

The cost that varies with each unit of product produced, encompassing materials and labor but not fixed costs.

Sales Required

The minimum sales needed to achieve a specific financial goal or to cover costs.

Variable Cost

Costs that vary directly with the level of production or output.