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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Solutions

Chapter
Section
Chapter 3, Problem 15MCQ
Textbook Problem
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(Appendix 3A) In the method of least squares, the coefficient that tells the percentage of variation in the dependent variable that is explained by the independent variable is

  1. a. the intercept term.
  2. b. the x-coefficient.
  3. c. the coefficient of correlation.
  4. d. the coefficient of determination.
  5. e. None of these.

Expert Solution
To determine

Identify the coefficient that states percentage change in dependent variable that is explained by independent variable, as per least square method.

Explanation of Solution

Least Square Method:

Least square method is used to split mixed cost into fixed and variable components by using set of data points. Statistically best fitting line is identified for cost separation in this method.

d.

Proportional change in dependent variable, such as cost, described by an independent variable, such as units produced, are termed as coefficient of determination or R2. It represents the strength of correlation between activity and cost. Therefore, d is the correct option.

a.

Fixed cost in a cost formula represents intercept...

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Chapter 3 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
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