Needing a Simple Cost Estimator for Commercial Construction Costs in the City

question 9

Multiple Choice

Needing a simple cost estimator for commercial construction costs in the city, you hope to find a useful linear relationship between cost (y) and floor space (x) .You have data from a sample of four recently completed building projects: The estimated regression equation turns out to be y = 24 + 1.6x and s_y.x = 17.9.You want to construct an appropriate hypothesis test to determine whether we can use the sample data here to reject a β = 0 null hypothesis.Calculate the value of the proper test statistic, t_stat, for the test.

• A)4.2
• B)2.8
• C)5.1
• D)1.4
• E)6.3

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Definitions:

High-Low Method

A method utilized in managerial accounting for predicting variable and fixed costs by analyzing the activity's maximum and minimum levels.

Contribution Margin Ratio

A measure that shows the percentage of sales revenue that exceeds the variable costs of production.

Variable Costs

Variable costs are expenses that change in proportion to the activity of a business, such as raw material costs, which vary with production volume.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.