Your Boss Would Like You to Estimate the Fixed and Variable

question 5

Multiple Choice

Your boss would like you to estimate the fixed and variable components of a particular cost. Actual data for this cost over four recent periods appear below.
Using the least-squares regression method, what is the cost formula for this cost?

• A) Y = $24.51 + $1.08X
• B) Y = $10.33 + $1.92X
• C) Y = $0.00 + $2.32X
• D) Y = $15.80 + $1.70X

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Definitions:

Receivables Turnover

A financial ratio that measures how effectively a company collects its accounts receivable, calculated by dividing total sales by average accounts receivable.

Inventory Turnover

A measure of how frequently a company sells and replaces its stock of goods during a period, offering insight into sales efficiency and inventory management.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Earnings Before Interest

An indicator of a company's profitability calculated by subtracting all expenses except interest from revenues, commonly referred to as EBIT.