Total Fixed Costs Are $20,000 Per Month and Last Month

question 31

Essay

Total fixed costs are $20,000 per month and last month, total variable costs were $7,000 when total revenue was $28,000.
a)Write the algebraic expression for this flexible budget for total cost.
b)What assumptions are made for a linear cost function like this?

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Definitions:

F-test Statistic

A value used in statistics to compare two variances and determine if they are significantly different, commonly used in the analysis of variance (ANOVA) tests.

Regression Model

A statistical approach for estimating the relationships among variables, often used for prediction and forecasting.

Total Variation

The overall variation in a set of data, which can be partitioned into components attributed to various sources in statistical analyses.

SSR

Sum of Squares due to Regression, a measure used in statistical analysis to describe the variation explained by the regression model.