# Projection and Forecasting Techniques (B4:M1-2) Flashcards

what is the coefficient of determination (R squared)?

% of variation in the dependent variable (y) explained by the variation in the independent variables (x)

*value between 0 and 1. higher is better because better “fit”

what is the difference between simple regression and multiple regression?

simple: one independent variable (x)

multiple: more than one independent variable (x)

what is the difference between independent (x) and dependent variable (y)?

x: it explains the dependent variable (y)

y: this is the variable that we are trying to explain

flexible budget formula

total cost = FC + (VC per unit x number of units)

in a regression equation, which variable is estimated?

the dependent (y)

simple regression formula

y = a + Bx

y: dependent variable (e.g., total cost)

a: y intercept of regression line (e.g., fixed cost)

B: slope of regression line (e.g., variable cost per unit)

x: independent variable (e.g., output)

in order to use the flexible budget formula, you must know what the variable cost per unit is. How do you determine that?

by using the high-low method.

highest cost - lowest) / (highest volume - lowest

what is the premise of the learning curve?

efficiency/production increases as experience is gained

what is the difference between absorption costing and direct (variable) costing?

a: charges DM, DL, VO, and FO to inventoriable costs (required for external reporting)

d: same as absorption, but excludes FO from inventoriable costs (i.e., expenses FO as period cost)

breakeven point in units = ?

total fixed costs / contribution margin per unit

which costing method actually encourages larger inventories?

absorption

what is cost-based pricing associated with? (3 things)

price stability

price justification

fixed-cost recovery

contribution margin = ?

revenue - variable costs (DM, DL, VO, shipping and packing, variable selling expenses)

margin of safety = ?

total sales - breakeven sales

break even point in dollars = ?

total fixed cost / contribution margin ratio*

*contribution margin / sales

or

break even units x sales price per unit