Terry Smith Corporation Used Least Squares Regression Analysis to Obtain

question 198

Essay

Terry Smith Corporation used least squares regression analysis to obtain the following
output:
Personnel Department Cost
Explained by Number of Employees

Constant	$5,800
Standard error of Y estimate	$630
R - squared	0.8924
No. of observations	20
Degrees of freedom	18
X coefficient(s)	1.902
Standard error of coefficient(s)	0.0966

a. What is the total fixed cost?
b. What is the variable cost per employee?
c. Prepare the line ar cost function.
d. What is the coefficient of determination? Comment on the goodness of fit

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Definitions:

Convertible Bonds

Bonds that can be converted into a predetermined number of shares of the issuing company's equity at certain times during their life, usually at the discretion of the bondholder.

Bond Redemption

The process whereby a bond issuer returns the bond's principal value to the bondholder, effectively terminating the bond at or before its maturity.

Carrying Value

Carrying Value is the book value of an asset or liability on a company's balance sheet, calculated as the original cost minus depreciation, amortization, or impairment costs.

Mortgage Note

A legal document that binds a borrower to repay a loan used to purchase property, outlining the terms of the mortgage.