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Exhibit 17.4.A researcher wants to examine how the remaining balance on $100,000 loans taken 10-20 years ago depends on whether the loan was a prime or sub-prime loan.He collected a sample of 25 prime loans and 25 sub-prime loans and records the data in the following variables: Balance = the remaining amount of loan to be paid off (in dollars) ,
Time = the time elapsed from taking the loan,
Prime = a dummy variable assuming 1 for prime loans,and 0 for sub-prime loans.
The regression results obtained for the models:
Model A: Balance = β0 + β1Prime + ε
Model B: Balance = β0 + β1Time + β2Prime + β3Time × Prime + ε
Model C: Balance = β0 + β1Prime + β2Time × Prime + ε,
Are summarized below. Note.The values of relevant test statistics are shown in parentheses below the estimated coefficients.
Refer to Exhibit 17.4.Using Model B,what is the alternative hypothesis for testing the significance of Time?
Variable Costing
An accounting method that charges only variable costs to cost of goods sold and reports fixed costs separately as period costs.
Fixed Manufacturing Overhead
Costs associated with production that do not vary with the level of output, such as salaries of managers and rent for factory buildings.
Absorption Costing
An accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed overhead—in the cost of a product.
Product Cost
Product cost refers to the total costs incurred to create a product, including direct labor, direct materials, and allocated overhead expenses, crucial for pricing and profitability analysis.
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