Question Details

A major concern that arises with multiple regression



1) The coefficient of determination is important in explaining variances in estimating equations. For a certain estimating equation, the unexplained variation was given as 22,506. The total variation was given as 51,150. What is the coefficient of determination for the equation? 
A) 0.34 
B) 0.43 
C) 0.56 
D) 0.75

2) The Perize Corporation used regression analysis to predict the annual cost of indirect materials. The results were as follows: 

	Indirect Materials Cost Explained by Units Produced
	Constant	$15,685
	Standard error of Y estimate	$3,500
	r2	0.7832
	Number of observations	20
	X coefficient(s)	10.25
	Standard error of coefficient(s)	2.1876

A) Y = $15,685 + $10.25X 
B) Y = $3,500 + $5.15X 
C) Y = $19,185 + $4.48X 
D) Y = $12,285 + $10.25X 


3) Corise's Cola was to manufacture 500 cases of cola next week. The accountant provided the following analysis of total manufacturing costs. 

	Variable	Coefficient	Standard Error	t-Value
	Constant	115	82.73	1.39
	Independent variable	230	105.50	2.18
	r2 = 0.82 

What is the estimated cost of producing the 500 cases of cola? 
A) $115,115 
B) $57,730 
C) $24,380 
D) $9,744 

4) Midose's Stables used two different independent variables (trainer hours and number of horses) in two different equations to evaluate the cost of training horses. The most recent results of the two regressions are as follows: 

Trainer's hours:
Variable	Coefficient	Standard Error	t-Value
Constant	$1,004.65	$217.93	4.61
Independent Variable	$22.99	$3.23	7.11
r2 = 0.56

Number of horses:
Variable	Coefficient	Standard Error	t-Value
Constant	$5,240.95	$1,180.40	4.44
Independent Variable	$951.48	$271.85	3.50
r2 = 0.63

What is the estimated total cost for the coming year if 15,000 trainer hours are incurred and the stable has 350 horses to be trained, based upon the best cost driver? 
A) $96,327.90 
B) $338,258.95 
C) $345,854.65 
D) $14,277,440.95 


5) A major concern that arises with multiple regression is multicollinearity, which exists when ________.
A) the dependent variable is not normally distributed 
B) the standard errors of the coefficients of the individual variables decrease
C) the R2 statistic is low 
D) two or more independent variables are highly correlated with one another 




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