US CMA Part 1 · Chapter 6 · Question 15 of 22
A regression of monthly utility cost on machine hours has a coefficient of determination (R-squared) of 0.81. What does this indicate?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 81% of the variation in utility cost is explained by variation in machine hours
Explanation
R-squared measures the proportion of the variation in the dependent variable explained by the independent variable. It is not the slope, not a probability, and the correlation coefficient would be the square root, 0.9 (if the relationship is positive).
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