In regression analysis, if the observed cost is 62 and the predicted cost is 29, the disturbance term would be ____________?
Show answer Hide answer
Answer: A. 33
Explanation
The disturbance term represents the difference between the observed cost and the predicted cost. Subtracting the predicted cost of 29 from the observed cost of 62 yields a disturbance term of 33. In regression analysis, each data point has a residual error representing random or unmodeled fluctuations. Positive residuals occur when actual observed costs exceed the cost predicted by the regression line.
Monitoring residual errors allows financial analysts to spot unusual cost spikes or operational inefficiencies. Large disturbance terms often trigger deeper internal audits to uncover hidden manufacturing cost drivers. Values like 91, 81, or 43 stem from adding figures together or making arithmetic mistakes. The correct residual is found exclusively by taking the difference between observed and predicted costs.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
Related questions
Q1. In production volume variance, a fixed cost of acquisition, such as equipment and plant leases, is known as ____________?
Show answer Hide answer
Answer: B. lump sum fixed cost
Lump-sum fixed costs represent fixed acquisition expenses like plant and equipment leases that do not vary with short-term volume. These committed costs form the baseline capacity required to run manufacturing operations...
Q2. Under variable costing, variable manufacturing costs and fixed manufacturing costs focus on __________?
Show answer Hide answer
Answer: B. similarities
Variable costing and absorption costing both include variable and fixed manufacturing costs to highlight production cost elements. Both costing methods track production expenses through the manufacturing cycle, differing...
Q3. The process of analyzing changes that occur in total revenues, operating income, and costs is known as _____________?
Show answer Hide answer
Answer: D. cost volume profit analysis
Cost-volume-profit analysis examines how changes in costs, volume, and prices affect total revenues and operating income. This analytical framework models the mathematical interplay between operational drivers and financ...
Q4. Operating income will differ between two costing methods if the __________?
Show answer Hide answer
Answer: B. inventory changes
Operating income will differ between variable and absorption costing whenever inventory levels change during the period. When production equals sales and inventory is stable, both methods report identical operating incom...
Q5. In the linear cost function y=a + bx, the goal is to determine the ___________?
Show answer Hide answer
Answer: A. values of a and b
Regression analysis methods like high-low or least squares aim to determine the numerical values of intercept 'a' and slope 'b'. Solving for these parameters completes the linear cost function equation. The intercept 'a'...
Q6. When plotting cost functions, machine hours and batch numbers are represented on ___________?
Show answer Hide answer
Answer: C. x-axis
Machine hours and batch numbers are cost drivers, which makes them the independent variable, and the independent variable is plotted on the horizontal x-axis. The dependent variable, total cost, goes on the vertical y-ax...