Summarize Why Caution Should Be Exercised When Interpreting Correlations as Pertaining

question 49

Essay

Summarize why caution should be exercised when interpreting correlations as pertaining to the following:
a. cause and effect
b. restricted range
c. outliers

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Definitions:

Fixed Overhead

Costs associated with running a business that do not change with the level of production or sales, such as rent, salaries, and insurance.

Variable Overhead Rate

Variable Overhead Rate is the portion of indirect manufacturing costs that varies in proportion to production volume or activity levels, such as utilities or raw materials.

Actual Production

The real quantity of goods or services produced during a specific period, as opposed to planned or projected quantities.

Fixed Factory Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs attributed to a variation in produced or achieved volumes of goods.