If We Wanted to Measure the Seasonal Variations on Stock

question 144

Multiple Choice

If we wanted to measure the seasonal variations on stock market performance by month, we would need:

• A)50 indicator variables, since the stock market has a 5-day working week.
• B)12 indicator variables to represent the 12 months.
• C)11 indicator variables.
• D)55 indicator variables.

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Definitions:

Sunk Cost

A cost that has already been incurred and cannot be recovered.

Contribution Format

An income statement format that separates fixed and variable costs, showing contribution margin which is sales revenue minus variable costs.

Contribution Margin

The amount by which sales revenue exceeds variable costs of production, indicating how much contributes to covering fixed costs.

Variable Expenses

Costs that vary in proportion to changes in the level of activity or volume of production.