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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.
Return on Investment and Residual Income This is a traditional approach to performance measurement given by: ROI = Income Invested Capital (m
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what are the factors should be considered before terminated the operation of a losing firm??
Determine the Inputted cost It is hypothetical cost required to be considered to make costs comparable. It is the owner of the factory charges rent of the factory to the cost
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