B4-M1 Projection and Forecasting Techniques 1

Question 1

what is probability (risk) analysis?

Answer 1

it is used to examine the possible outcomes given different alternatives. Sensitivity analysis uses a trial and error method in which the sensitivity of the solution to changes in variables is calculated. Therefore, probability analysis is an extension of sensitivity analysis

Question 2

what is regression analysis?

Answer 2

• Regression analysis is a statistical method that fits a line to the data by the method of least squares. It is the most accurate way to classify costs of an object as either fixed or variable
• Estimates the dependent cost variable
• Multiple regression analysis is an expansion of simple regression because it allows consideration of more than one independent variable

Question 3

what does correlation coefficient measure?

Answer 3

the correlation coefficient measures the strength of the relationship between variables. It is a number between -1 (downward slope) and +1(upward slope). the closer to -1 or +1, the better