Booster, Inc. recently conducted a least-squares regression analysis to predict selling expenses. The company has constructed the following regression equation: Y = 329,000 + 7.80X. Which of the following statements is false if the primary cost driver is number of units sold?
A) The company anticipates $329,000 of fixed selling expenses.
B) "Y" represents total selling expenses.
C) The company expects both variable and fixed selling expenses.
D) For each unit sold, total selling expenses will increase by $7.80.
E) "X" represents the number of hours worked during the period.

Question

Quizplus · Accepted Answer

The regression equation is predicting selling expenses, with the primary cost driver being the number of units sold, not the number of hours worked. Therefore, statement E is false. Statements A, B, C, and D are true based on the regression equation given.