A Manager Uses Regression to Express Sales as a Function

question 81

Multiple Choice

A manager uses regression to express sales as a function of advertising expenditures (X1) , and per capita income (X2) in your sales area. The following multiple linear regression equation is developed:
Y = 10 + 0.51X1 + 0.45X2
The coefficient of determination is 0.96
Determine which of the following conclusions is valid regarding the coefficient of determination:

• A) More analysis is needed. The coefficient of determination leaves much unexplained.
• B) The regression line fits the data used in the sample very well. There is a strong indication of the relationship of the two variables with sales.
• C) The coefficient of determination is positive because the constant term is positive.
• D) The coefficient of determination should always be greater than one.

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Definitions:

Direct Labor Cost

The wages paid to workers directly involved in production or service delivery, constituting a major component of a product's cost.

Variable Production

Production costs that vary in total directly and proportionately with changes in the production level.

Fixed Production

Production levels set without regard to the varying levels of demand or activity, often resulting in constant output rates.

Machine-Hours

The total duration that machinery is utilized for production activities, expressed in hours, serving as a basis for allocating machine-related costs to products.