Page 269 - F2 - MA Integrated Workbook STUDENT 2018-19

Statistical techniques

Test your understanding 5

DGR is trying to understand the relationship between sales and advertising
expenditure. The management accountant has carried out some analysis and
has found that the coefficient of determination is 0.49.

Which of the following in correct?

A For every $0.49 spent on advertising, $1.00 of sales will be generated.

B For every $1.00 spent of advertising, $0.49 of sales will be generated.

C 49% of the variation in sales can be explained by the corresponding
variation in advertising

D 49% of the variation in advertising can be explained by the
corresponding variation in sales

Illustrations and further practice

Now try TYU question 4 and 5 from Chapter 12.

261