SCENARIO 13-14 An Automotive Engineer Would Like to Be Able to Predict

question 92

Multiple Choice

SCENARIO 13-14
An automotive engineer would like to be able to predict automobile mileages.She believes that the two most important characteristics that affect mileage are horsepower and the number of cylinders (4 or 6) of a car.She believes that the appropriate model is
Y = 40 - 0.05X1 + 20X2 - 0.1X1X2
where X1 = horsepower
X2 = 1 if 4 cylinders, 0 if 6 cylinders
Y = mileage.
-Referring to SCENARIO 13-14, the fitted model for predicting mileages for 6-cylinder cars is_.

• A)40 - 0.05X1
• B)40 - 0.10X1
• C)60 - 0.10X1
• D)60 - 0.15X1

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Definitions:

MACRS Depreciation

A method of accelerated depreciation allowed by the IRS for tax purposes, applicable to tangible assets over their useful lives.

Percentage-Of-Completion Method

An accounting method that recognizes revenue and expenses of long-term contracts as a percentage of work completed during the period.

Completed-Contract Method

This is an accounting method that recognizes revenues and expenses from a long-term contract only when the contract is completed.

Deferred Tax Liability

A tax obligation that is recorded on the balance sheet but not yet due, arising from temporary differences between the accounting and tax treatment of transactions.