What are the steps in computing the cost of a prediction error when using the EOQ decision model?

Q: How do the Internal-Rate-of-Return Criterion relate to the PW Analysis?

A: Capital budgeting:   It is the process in which the business uses to determine which proposed fixed…

Q: What is the Tolerable Error Rate?

A:

Q: Which of the following is not one of the main issues regarding data collection which can…

A: Data collection is one of the modt fundamental and important steps in any statistical analysis. If…

Q: Why is it crucial to estimate the MARR correctly?

A: It is the minimum return rate on the project which an entity computes prior to the staring of the…

Q: As a risk measure, Expected shortfall is more accurate and reliable in comparison to Value-at-Risk.…

A: This is to compare and find out which one is more better among expected shortfall and Value-at-Risk.…

Q: What are the basic criteria for selecting a forecasting model?

A: The process that is used to anticipate the demand for the product or service of the business is…

Q: Why is the variance (or standard deviation) used as a measure of risk? What are the advantages and…

A: Reasons of utilizing variance as a risk measure: While consider a lesser risk in investment, fewer…

Q: Define . Slope of SML and its relationship to risk aversion

A: Introduction: SML refers to security market line, it is a line indicating the relationship between…

Q: An analysis of what happens to the estimate of net present value when only one input variable is…

A: Net Present Value: It is the present worth of future cash flows and the initial cost of the project.…

Q: The internal rate of return (IRR), despite its shortcomings, can be a useful analysis tool for…

A: IRR is the required rate of return for the project to have zero Net Present value.

Q: What are the two primary factors that are difficult to estimate in sensitivity analysis?

A: Answer: Sensitivity analysis is commonly used in determining the interactions in a system or even a…

Q: Explain the difference between a linear risk and a nonlinear risk.

A: Linear risk is an enterprise's risk, based on the traditional economic system of "take-up-dispose."…

Q: When using the high-low method, should you base the high and low observations on the dependent…

A: Cost Function:Cost function represents the basic change comes in the total cost due to the change in…

Q: What types of variables are commonly used in a CRA Z-score model? Define the ratios and explain how…

A: CRA-Z model helps in finding the organisation's default and it eases to measure the control of the…

Q: What type of risk is measured by the standard deviation?

A: Standard deviation is the measure of risk that the actual return of an investment will deviate from…

Q: Compare judgmental, time series, and causal forecasting models.

A: Judgmental models are the subjective criteria in which gauges are based on master ideas. Individuals…

Q: How are Sensitivty Analysis and Scenario Analysis different in details?

A: Sensitivity analysis is the evaluation of the impact on the project when there may be a few…

Q: what are the major assumptions in making this estimate for REV?

A: Analyst estimates the worth of the real estate for the clients because now the investors have also…

Q: Explain the concept of iso-expected return lines, iso-variance ellipses, and the critical line and…

A: Minimum variance frontier: It is a frontier that identifies those portfolios that have a minimum…

Q: a. what is avariance? b. when might a favorable variance not be a good outcome

A: What is Variance :  A variance is the difference between the cost or revenue planned or budgeted by…

Q: Distinguish between the terms sampling risk and nonsampling risk.

A: Introduction: The risk of sampling is that the conclusion based on a sample may differ from the…

Q: This is is used to check the effect on the recommendations of a model if the estimates turn out to…

A: solution: concept In a what if analysis we try to answer the question of what if What if the value…

Q: Explain Key Statistical Relationships between Covariance and Correlation of Returns?

A: Covariance:It is defined as the statistical relationship between stock prices of stock that vary…

Q: In general, variance analysis is said to provide information about _________ and __________…

A:

Q: Differentiate between variance analysis and sensitivity analysis

A: Managers of small businesses can benefit from both variance and sensitivity analyses when trying to…

Q: What is the difference between positive and negative predictive value?

A: Positive predictive value is the probability that subjects with a positive screening test truly have…

Q: Construct a sample problem of External Rate of Return (ERR).

A: External rate of return (ERR) or Internal rate of return (IRR) is the rate at which Present Value of…

Q: Which of the following items would be useful to management in deciding whether to investigate the…

A: Standard costs are the budgeted costs related with the production, manufacturing and selling of…

Q: What should be done to apply rate-of-return analysis correctly?

A: Rate of return: It can be defined as the rate of interest that has been earned by the company on the…

Q: How does variance analysis help in continuous improvement?

A: Variance Analysis: Variance analysis is the process of ascertaining the deviations between actual…

Q: What is the forecasting risk when falling decisions based on the nvp rule?

A: NPV  The method in which the present value of both cashflow and inflows are calculated using a…

Q: When we work with the breakeven point, how important is it to understand what a decision variable…

A: The question is related to Marginal Costing. The break-even point is that level of sales at which…

Q: What are some pros and cons of computing an expected return using a user-specified model versus…

A: Expected Return: As opposed to observed returns that are measured at the end of a given period, the…

Q: The audit risk model consists of: AR = IR x CR x DR.  The detection risk is the dependent variable.…

A: Level of Detection Risk is dependent on levels of Inherent Risk and level of Control Risk. There is…

Q: What does the concept of ‘management by exception’ mean and what factors are considered when…

A: Management by exception is a technique used in management information system.

Q: For any given distribution of outcomes and probabilities, describe how preferences over risk affect…

A: An outcome is a potential result of an experiment in probability theory. The likelihood of an event…

Q: Consider the following four statements about value at risk (VaR): The choice of VaR confidence…

A: It leads to the problem with the usage of VaR in the practice. The uniformity of practice is not…

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance. 

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.