Armer Company is accumulating data to use in preparing its annual profit plan for the coming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff has suggested the use of linear regression to derive an equation for maintenance hours and costs. Data regarding the maintenance hours and costs for the last year and the results of the regression analysis follow:The coefficient of determination for Armer's regression equation for the maintenance activities is A) 34.469/49.515. B) 0.99724. C) square root of 0.99724. D) (0.99724)². E) None of these answer choices are correct.

Question

Quizplus · Accepted Answer

The coefficient of determination is a measure of how well the regression equation fits the data. It represents the proportion of the variability in the dependent variable (costs) that is explained by the independent variable (maintenance hours) in the regression equation. The coefficient of determination is equal to the square of the correlation coefficient (r). In this case, the correlation coefficient is 0.99862, so the coefficient of determination is (0.99862)^2 = 0.99724. Therefore, the best choice is B.

Armer Company Is Accumulating Data to Use in Preparing Its