THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION

question 198

Essay

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
As director of the local tourist board,you are interested in determining the factors that influence the hotel occupancy rate in your city each month.Hotel occupancy can be measured as the percentage of available hotel rooms that are occupied by paying customers.You develop the following model: Y = β₀ + β₁X₁ + β₂X₂ + β₃X₃ + β₄X₄ + ε,where Y is the hotel occupancy rate,X₁ is the total number of passengers arriving at the airport,X₂ is a price index of local hotel room rates,X₃ is the consumer confidence index,and X₄ is a dummy variable = 1 during the months of June,July,and August.You look at data from the past 36 months and obtain the following results:
= 67.1 + 0.02x₁ - 0.055x₂ + 0.08x₃ + 12.3x₄,R² = 0.67,
= 58.3,
= 0.008,
= 0.01,
= 0.06,
= 4.7,and SSE = 576.
-The director of a local tourist board is interested in determining the factors that influence the hotel occupancy rate in his city each month.Hotel occupancy can be measured as the percentage of available hotel rooms that are occupied by paying customers.He develops two models: Y = β₀ + β₁X₁ + β₂X₂ + β₃X₃ + β₄X₄ + ε and Y = β₀ + β₁X₁ + β₂X₂ + ε,where Y is the hotel occupancy rate (as a percentage),X₁ is the total number of passengers arriving at the airport (measured in thousands),X₂ is an average of local hotel room rates,X₃ is the consumer confidence index,and X₄ is a dummy variable = 1 during the months of June,July and August.He looks at data from the past 36 months and runs both of the regressions above.The results of these regressions are as follows:
Model 1: R² = 0.67 and SSE = 576,Model 2: R² = 0.61 and SSE = 733.Using the F- test on a subset of variables,test whether β₃ = β₄ = 0.

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Definitions:

Break-even Point

The break-even point is the point at which total costs equal total revenues, resulting in neither profit nor loss for the business.

Estimated Fixed Costs

Forecasted expenses that do not vary with the level of production or sales over a specific period of time.

Net Sales

This refers to the total revenue from sales minus returns, allowances for damaged or missing goods, and discounts.

Contribution Margin Ratio

The percentage of each sales dollar that is available to cover the fixed costs and provide an operating income.