Measurement, Simultaneous Equations, and Time Series Questions QRB/501

MEASUREMENT, SIMULTANEOUS EQUATIONS, AND TIME SERIES

Measurement, Simultaneous Equations, and Time Series Questions

Levels of Measurement Question from; Statistical Techniques in Business and Economics text. Ch.1, Exercise 18.

Refer to the Wage data, which reports information on annual wages for a sample of 100 workers. Also included are variables relating to industry, years of education, and gender for each worker. A) Which of the 12 variables are qualitative and which are quantitative? 1) Annual wage in dollars

2) Industry (1 = Manufacturing, 2 = Construction, 0 = Other) 3) Occupation (1 = Mgmt., 2 = Sales, 3 = Clerical, 4 = Service, 5 = Prof., 0 = Other) 4) Years of education

5) Southern resident (1 = Yes, 0 = No)

6) Non-white (1 = Yes, 0 = No)

7) Hispanic (1 = Yes, 0 = No)

8) Female (1 = Yes, 0 = No)

9) Years of Work Experience

10) Married (1 = Yes, 0 = No)

11) Age in years

12) Union member (1 = Yes, 0 = No)

When the characteristic being studied is nonnumeric it is a Qualitative Variable. From the above 12 variables the ones that are qualitative are; 2) Industry, 3) Occupation, 5) Southern resident, 6) Non-white, 7) Hispanic, 8) Female, 10) Married, 12) Union Member. When the variable studied can be reported numerically it is called a Quantitative Variable. From the above 12 variables the ones that are quantitative are; 1) Annual wage in dollars, 4) Years of education, 9) Years of work experience, 11) Age in years.

B) Determine the level of measurement for each variable.

The level of measurement of each variable often dictates the calculations that can be done to summarize and present the data and will also determine the statistical tests that should be performed. The above 12 variables each fall into a level of measurement.

1) Annual wage in dollars – Ratio level of measurement

2) Industry – Nominal level of measurement

3) Occupation – Nominal level of measurement

4) Years of education – Ratio level of measurement

5) Southern resident – Nominal level of measurement

6) Non-white – Nominal level of measurement

7) Hispanic – Nominal level of measurement

8) Female – Nominal level of measurement

9) Years of work experience – Ratio level of measurement

10) Married – Nominal level of measurement

11) Age in years – Ratio level of measurement

12) Union member – Nominal level of measurement

Simultaneous Equations Question from; Introduction to Management Accounting text. Ch. 3, Problem 3-41.

High-low Method.

Manchester Foundry produced 45,000 tons of steel in March at a cost of $1,150,000. In April, the foundry produced 35,000 tons at a cost of $950,000. Using only these two data points, determine the cost function for Manchester. Variable cost: V = Change in Costs/Change in Activity.

V = $1,150,000 - $950,000/45,000 – 35,000.

V = $200,000/10,000

V = $20

Fixed cost: F = Total Cost - Variable Cost.

At High: F = Cost – (V x Tons of Steel)

F = $1,150,000 – ($20 x 45,000)

F = $1,150,000 – $900,000

F = $250,000

At Low: F = Cost – (V x Tons of Steel)

F = $950,000 – ($20 x 35,000)

F = $950,000 - $700,000

F = $250,000

Therefore, Manchester’s cost function, measured by the High-low Method is;

Total Cost = Fixed Cost + (Variable Cost x Tons of Steel)

Y(Total Cost) = $250,000 + ($20 x Tons of Steel)

At High: Y = $250,000 + ($20 x 45,000)

Y = $250,000 + $900,000

Y= $1,150,000

At Low: Y = $250,000 + ($20 x 35,000)

Y = $250,000 + $700,000

Y= $950,000

Time Series Question from; Accounting: What the Numbers Mean text. Ch. 3, Case C3.18

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