A Health Insurance Company Conducted a Linear Regression Analysis Between

question 9

Multiple Choice

A health insurance company conducted a linear regression analysis between the number of claims per customer (Y) and customer age (X) that resulted in the following equation analyzing customer risk: The above equation implies that an

• A) increase of one year in age is correlated with an increase of 5 claims.
• B) increase of one year in age is correlated with an increase of 1 claim.
• C) increase one year in age is correlated with an increase of 50.
• D) increase of one year in age is correlated with a decrease of 5 claims.

---

Definitions:

Predetermined Overhead Rate

A rate used to allocate estimated overhead costs to products or services, based on a preselected activity base.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, excluding direct materials and direct labor expenses.

Machine-Hours

The total number of hours that machinery is operating during a certain period, often used as a basis for allocating manufacturing overhead.

Manufacturing Overhead

All indirect factory-related costs incurred while producing a product, such as utilities and salaries for management.