Problem 5-50 Interpretation of Regression Results: Multiple Choice (LO 5-5)

The Business School at Eastern College is collecting data as a first step in the preparation of next year's budget. One cost that is being looked at closely is administrative staff as a function of student credit hours. Data on administrative costs and credit hours for the most recent 13 months follow:

Month	Administrative Costs			Credit Hours
July	$	129,301			340
August		82,613			319
September		228,580			1,532
October		216,394			1,778
November		258,263			1,905
December		184,449			1,780
January		219,137			2,119
February		245,000			3,367
March		209,642			2,786
April		191,925			1,731
May		249,978			2,144
June		170,418			858
July		128,167			571
Total	$	2,513,867			21,230
Average	$	193,374			1,633

The controller's office has analyzed the data and given you the results from the regression analysis:

SUMMARY OUTPUT

Regression Statistics
Multiple R	.82101981
R Square	.674073540
Adjusted R Square	.644443860
Standard Error	31745.13900
Observations	13

ANOVA

	df	SS	MS	F	Significance F
Regression	1	22926343964.00	22926343964.00	22.7500000	.0005810
Residual	11	11085292337	1007753849
Total	12	34011636301.00

	Coefficients	Standard Error	T Stat	P-value	Lower 95%	Upper 95%
Intercept	115556.081	18539.26329	6.23304600	.0000641	74751.4168	156360.7449
Credit Hours	47.6513400	9.9904477	4.76969017	.0005810	25.6625018	69.6401782

Required:

(a)

In the standard regression equation y = a + bx, the letter b is best described as the

	Constant coefficient.
	Correlation coefficient.
	Dependent variable.
	Independent variable
	Variable cost coefficient.

(b)

In the standard regression equation y = a + bx, the letter y is best described as the

	Constant coefficient.
	Correlation coefficient.
	Dependent variable.
	Independent variable
	Variable cost coefficient.

(c)

In the standard regression equation y = a + bx, the letter x is best described as the

	Constant coefficient.
	Correlation coefficient.
	Dependent variable.
	Independent variable
	Variable cost coefficient.

(d)

If the controller uses the high-low method to estimate costs, the cost equation for administrative costs is (Round variable cost per hour to four decimal places for intermediate computations. Round final answers to whole dollar value.)

Cost = $165,618.00