Burmer CoHas Accumulated Data to Use in Preparing Its Annual Profit

question 71

Multiple Choice

Burmer Co.has accumulated data to use in preparing its annual profit plan for the upcoming year.The cost behavior pattern of the maintenance costs must be determined.Data regarding the machine hours and maintenance costs for the last year and the results of the regression analysis are as follows:
A staff assistant has run regression analyses on the data and obtained the following output using Excel:
The t statistic for the independent variable:

• A)Is statistically significant at less than 5% risk.
• B)At 11.46,is statistically significant.
• C)At 52.78,is too large to be statistically significant.
• D)Lies somewhere between 6.491 and 7.063. The t statistic is 52.78,and is considerably larger than the desired level of 2.0;the p-value or risk level is.000000000000144 which is significantly less than a risk level of 5%.

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Definitions:

Discounted Payback Period

The time required to recoup the cost of an investment taking the time value of money into account, effectively the period it takes for an investment's cash flows to cover its initial cost.

Cash Inflows

Money coming into a business from various sources, including sales, investment income, and financing activities.

Required Rate

The minimum percentage return that an investor expects to achieve from an investment.

Average Accounting Return

A measure of the profitability of an investment, calculated as the average net income divided by the average book value of the investment.