TABLE 16-13 A Local Store Developed a Multiplicative Time-Series Model to Forecast

question 115

Multiple Choice

TABLE 16-13
A local store developed a multiplicative time-series model to forecast its revenues in future quarters, using quarterly data on its revenues during the 4-year period from 1998 to 2002. The following is the resulting regression equation:
log₁₀Y^{^} = 6.102 + 0.012 X - 0.129 Q₁ - 0.054 Q₂ + 0.098 Q₃
where
Y^{^} is the estimated number of contracts in a quarter
X is the coded quarterly value with X = 0 in the first quarter of 1998.
Q₁ is a dummy variable equal to 1 in the first quarter of a year and 0 otherwise.
Q₂ is a dummy variable equal to 1 in the second quarter of a year and 0 otherwise.
Q₃ is a dummy variable equal to 1 in the third quarter of a year and 0 otherwise.
-Referring to Table 16-13, in testing the significance of the coefficient for Q₁ in the regression equation (- 0.129) which has a p-value of 0.492. Which of the following is the best interpretation of this result?

• A) The revenues in the first quarter of the year are not significantly different than the revenues in the fourth quarter (? = 0.05).
• B) The revenues in the first quarter of the year are significantly different than the revenues in the fourth quarter (? = 0.05).
• C) The revenues in the first quarter of the year are significantly different than the revenues in an average quarter (? = 0.05).
• D) The revenues in the first quarter of the year are not significantly different than the revenues in an average quarter (? = 0.05).

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Definitions:

Understated

Describes an amount reported lower than it actually is, either in financial statements or any other reporting context.

Overstated

Refers to financial statements or figures being reported as more than their actual or true value.

Cost-to-retail Ratio

A method used to estimate the value of ending inventory and cost of goods sold by comparing the cost of goods available for sale to the retail price of the goods.