Chapter 3, Regression Analysis (Deck 3.2)

Question 1

What is R Squared?

What percentage does R squared have to be in order to be statistically significant.

Answer 1

R Squared means: How much of the cost, or the dependent variable, can be explained by the independent variable.
Ex: “Total costs are 65% explained by the total costs that we came up with.

Your R Squared needs to be higher than 30% in order to be statistically significant.

If you get a low number here, you can’t use the regression because it is not statistically valid.

Question 2

What does the Y Intercept signify?

Answer 2

The Y Intercept is significant of your Fixed Costs.

Question 3

What does the Independent Variable signify?

Answer 3

The Independent Variable is significant of your Variable Cost Per Unit.

Question 4

Which is the more accurate method? The High-Low Method or the Regression Method?

Answer 4

The Regression Method is the more accurate method.

Question 5

What does the P-Value of the Independent Variable tell you?

What would 0.05 mean for a P-Value?

Answer 5

The P-Value of the Independent Variable is similar to R-Squared. This shows up the possibility that our results are random.

0.05 for a P-Value would mean that there was a 5% chance that this value occurred randomly, meaning it would not be a valid statistical exercise.

Question 6

What is Multiple Regression?

Answer 6

Multiple Regression is when there is more than one factor that enter into the final results.