Instruction 14-6
a Local Store Developed a Multiplicative Time-Series Model $$\log _ { 10 } \hat { Y } = 6.102 + 0.012 X - 0.129 Q _ { 1 } - 0.054 Q _ { 2 } + 0.098 Q _ { 3 }$$

question 40

Multiple Choice

Instruction 14-6
A local store developed a multiplicative time-series model to forecast its revenues in future quarters, using quarterly data on its revenues during the four-year period from 2005 to 2009. The following is the resulting regression equation:
$$\log _ { 10 } \hat { Y } = 6.102 + 0.012 X - 0.129 Q _ { 1 } - 0.054 Q _ { 2 } + 0.098 Q _ { 3 }$$
Where
$X$ is the coded quarterly value with $X = 0$ in the first quarter of 2005 .
$Q _ { 1 }$ is a dummy variable equal to 1 in the first quarter of a year and 0 otherwise.
$Q _ { 2 }$ is a dummy variable equal to 1 in the second quarter of a year and 0 otherwise.
$Q _ { 3 }$ is a dummy variable equal to 1 in the third quarter of a year and 0 otherwise.
-Referring to Instruction 14-6,to obtain a forecast for the third quarter of 2010 using the model,which of the following sets of values should be used in the regression equation?

• A) X = 22, Q₁ = 0, Q₂ = 0, Q₃ = 1
• B) X = 23, Q₁ = 0, Q₂ = 0, Q₃ = 0
• C) X = 23, Q₁ = 0, Q₂ = 0, Q₃ = 1
• D) X = 22, Q₁ = 0, Q₂ = 0, Q₃ = 0

Learn the relevance of net realizable value in inventory valuation for damaged and obsolete goods.

Analyze the reliability of inventory estimation methods and their significance for accounting and reporting.

Understand and apply various inventory valuation methods such as FIFO, LIFO, Weighted Average, and Specific Identification.

Recognize the impact of inventory valuation errors on financial statements and their correction.

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Definitions:

Full Capacity

The highest amount of production a business can maintain for an extended time without needing to raise its fixed expenses.

Capacity

The maximum level of output that a company can sustain to make a product or provide a service, taking into account current resources and facilities.

Short Run

A time period in economics during which at least one input is fixed while others may be variable, affecting the production and costs of a business.

Long Run

In economics, the long run refers to a period in which all inputs or factors of production can be varied and no costs are fixed.