The Least Squares Method Requires That the Variance $\sigma _ { \varepsilon } ^ { 2 }$

question 148

Short Answer

The least squares method requires that the variance $\sigma _ { \varepsilon } ^ { 2 }$ of the error variable $\varepsilon$ is a constant no matter what the value of x is. When this requirement is violated, the condition is called: $\begin{array}{|l|l|}\hline\text { A. } & \text {multicollinearity. }\\\hline \text { B. } & \text {heteroscedasticity. } \\\hline \text { C. } &\text { homoscedasticity.}\\\hline \text { D. } &\text {autocorrelation. }\\\hline\end{array}$

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Definitions:

Direct Labor Costs

Costs that are directly associated with the production of goods, such as wages paid to manufacturing staff.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to individual jobs or products based on a specific activity base.

Fixed Manufacturing Overhead

Manufacturing overhead costs that remain constant regardless of the level of production or activity volume.

Direct Labor Costs

The wages or salaries paid to workers who are directly involved in the production of goods or services.