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Correlation coefficient (r)
Correlation coefficient measures the degree of association between two variables such as the cost and the activity level.r = nΣxy - Σx Σy [nΣx2 – (Σx)2 ] [nΣy2 - (Σy)2]When the degree of association among the two variables is very close then it would be almost possible to plot the observation on a straight line and r will be almost equal to one.
-1≤ r ≤ 1If r= -1, then the two variables are said to be perfectly negatively correlatedIf r = +1, then the two variables are perfectly positively correlatedIf r = 0, then there is no correlation between the two variables.
depreciation,depletion and amortisation
Gather data concerning the relationship among the dependent and independent variables Collecting data is generally the most hard and time-consuming element of CER development.
POINT ESTIMATE OF PROBABILITIES This approach requires a number of different values for each of the uncertain variables to be selected. These might be values that are reasonabl
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Excercise 2-5 Granger products had the following transactions for the just completed month. The company had no beginning inventories. a)$75,000 in raw materials were purchased
Transition probabilities These are the probabilities of moving from one state to another in the next time period. Usually they are written in the form of a probability matrix.
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Cost volume profit analysis Meaning and definition Cost volume profit analysis is a technique for studying the relationship between cost volume and profits . profits of an
1. Compute the predetermined overhead rate.
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