A p-value of 1% for the intercept term in a regression of a cost driver against a cost indicates:
A) The true fixed costs are statistically significantly different from zero
B) There is only a 1% chance the true fixed costs are zero
C) The variable costs are immaterial in this cost function
D) Both (a) and (b)

Question

Quizplus · Accepted Answer

A p-value of 1% for the intercept term in a regression of a cost driver against a cost indicates that the true fixed costs are statistically significantly different from zero with a 99% level of confidence, which means there is only a 1% chance the true fixed costs are zero. Therefore, both (a) and (b) are correct. The p-value does not provide any information about the relevance of the variable costs in the cost function, so option (c) is not correct.

A P-Value of 1% for the Intercept Term in a Regression