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Free IIA IIA-CIA-Part3 Exam Questions (page: 44)

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PDF with 1555 Questions

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

  1. Independent Variable
  2. Dependent Variable
  3. Constant coefficient
  4. Variable coefficient

Answer(s): D

Explanation:

In the standard regression equation, b represents the variable coefficient. For example, in a cost determination regression, equals total costs, b is the variable cost per unit, is the number of units produced, and a is fixed cost. In preparing the annual profit plan for the coming year, Wilkens Company wants to determine the cost behavior pattern of the maintenance costs.
Wilkens has decided to use linear regression by employing the equation = a + bx for maintenance costs. The prior year's data regarding maintenance hours and costs, and the results of the regression analysis, are given below and in the opposite column.



How is the letter x in the standard regression equation best described?

  1. Independent Variable
  2. Dependent Variable
  3. Constant coefficient
  4. Coefficient of determination

Answer(s): A

Explanation:

The letters x in the standard regression equation is the independent variable. For example, in a regression to determine the total cost of production, equal units produced. In preparing the annual profit plan for the coming year, Wilkens Company wants to determine the cost behavior pattern of the maintenance costs. Wilkens has decided to use linear regression by employing the equation = a + bx for maintenance costs. The prior year's data regarding maintenance hours and costs, and the results of the regression analysis, are given below and in the opposite column.



Based upon the data derived from the regression analysis, 420 maintenance hours in a month would mean the maintenance costs rounded to the nearest U dollar) would be budgeted at

  1. U $3,780
  2. U $3,600
  3. U $3,790
  4. U $3,746

Answer(s): D

Explanation:

Substituting the given data into the regression equation results in a budgeted cost o US $3,746 rounded to the nearest US dollar).

y = a + bx y = 684.65 + 7.2884 420
y = us $3,746



What is the percentage of the total variance that can be explained by the regression?

  1. 99.724%
  2. 69.613%
  3. 80.982%
  4. 99.862%

Answer(s): A

Explanation:

The coefficient of determination r) measures the percentage of the total variance in cost that can be explained by the regression equation. If the coefficient of determination is .99724, 99.724% of the variance is explained by the regression equation. Thus, the values in the regression equation explain virtually the entire amount of total cost.



An internal auditor for a large automotive parts retailer wishes to perform a risk analysis and wants to use an appropriate statistical tool to help identify stores that would be out of line compared to the majority of stores. The most appropriate statistical tool to use is

  1. Linear time series analysis.
  2. Cross-sectional regression analysis.
  3. Cross tabulations with chi-square analysis of significance.
  4. Time series multiple regression analysis to identify changes in individual stores overtime.

Answer(s): B

Explanation:

Time series data pertain to a given entity over a number of prior time periods. Cross sectional data, however, pertain to different entities for a given time period or at a given time.
Thus, cross-sectional regression analysis is the most appropriate statistical tool because it compares attributes of all stores' operating statistics at one moment in time.



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