Question: Revenue vs cost. A paper published in the Asian Basic and Applied Research Journal (Vol. 2, 2020) examined the applicability of the Cost-Volume-Profit (CVP) model

Revenue vs cost. A paper published in the Asian Basic and Applied Research Journal (Vol. 2, 2020) examined the applicability of the Cost-Volume-Profit (CVP) model empirically for fifteen Indian sugar manufacturing companies using linear and quadratic regression. The result showed that a quadratic regression of total revenue 1y2, y = b0 + b1x + b2x2 on the components of total cost (x) may have been more appropriate. The regression results of the largest sugar manufacturing company in India, Eid Parry, were as follows: yn = 1954.87 - 1.11x - .00065x2 , R2 = .883.

a. If possible, give a practical interpretation of each of the b estimates in the model.

b. Give a practical interpretation of the coefficient of determination, R2 .

c. The coefficient of correlation for the straight-line model was reported as R2 = .791. Does this statistic alone indicate that the quadratic model is a better fit than the straight-line model? Explain.

d. What test of hypothesis would you conduct to determine if the quadratic model is a better fit than the straight-line model?

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