Projection and Forecasting Techniques (B4:M1-2)

Question 1

what is the coefficient of determination (R squared)?

Answer 1

% of variation in the dependent variable (y) explained by the variation in the independent variables (x)

*value between 0 and 1. higher is better because better “fit”

Question 2

what is the difference between simple regression and multiple regression?

Answer 2

simple: one independent variable (x)
multiple: more than one independent variable (x)

Question 3

what is the difference between independent (x) and dependent variable (y)?

Answer 3

x: it explains the dependent variable (y)
y: this is the variable that we are trying to explain

Question 4

flexible budget formula

Answer 4

total cost = FC + (VC per unit x number of units)

Question 5

in a regression equation, which variable is estimated?

Answer 5

the dependent (y)

Question 6

simple regression formula

Answer 6

y = a + Bx

y: dependent variable (e.g., total cost)
a: y intercept of regression line (e.g., fixed cost)

B: slope of regression line (e.g., variable cost per unit)

x: independent variable (e.g., output)

Question 7

in order to use the flexible budget formula, you must know what the variable cost per unit is. How do you determine that?

Answer 7

by using the high-low method.

highest cost - lowest) / (highest volume - lowest

Question 8

what is the premise of the learning curve?

Answer 8

efficiency/production increases as experience is gained

Question 9

what is the difference between absorption costing and direct (variable) costing?

Answer 9

a: charges DM, DL, VO, and FO to inventoriable costs (required for external reporting)
d: same as absorption, but excludes FO from inventoriable costs (i.e., expenses FO as period cost)

Question 10

breakeven point in units = ?

Answer 10

total fixed costs / contribution margin per unit

Question 11

which costing method actually encourages larger inventories?

Answer 11

absorption

Question 12

what is cost-based pricing associated with? (3 things)

Answer 12

price stability

price justification

fixed-cost recovery

Question 13

contribution margin = ?

Answer 13

revenue - variable costs (DM, DL, VO, shipping and packing, variable selling expenses)

Question 14

margin of safety = ?

Answer 14

total sales - breakeven sales

Question 15

break even point in dollars = ?

Answer 15

total fixed cost / contribution margin ratio*

*contribution margin / sales

or

break even units x sales price per unit