The Linear Equation Y = a + BX Is Often

question 86

Multiple Choice

The linear equation Y = a + bX is often used to express cost formulas.

• A)the a term represents variable cost in total.
• B)the X term represents total cost.
• C)the b term represents variable cost per unit of activity.
• D)the Y term represents total fixed cost.

---

Definitions:

Variable Cost

Variable Cost consists of expenses that vary directly with levels of production or sales volume.

Machine Hour

A machine hour is a unit of measure that represents the operation of a machine for one hour, used in allocating manufacturing costs based on time.

Least-squares Regression

Least-squares regression is a statistical method used to determine the line of best fit by minimizing the sum of squares of the differences between observed and predicted values.

Variable Cost

A cost that changes in proportion to changes in the volume of activity, such as materials and labor directly involved in producing a product.