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    PracticeACCAACCA MA — Management Accounting Practice Exam 6Question 09
    Easy2 marksMultiple Choice
    Data analysis and statistical techniquesArea BCorrelationStatistical Techniques

    ACCA · Question 09 · Data analysis and statistical techniques

    Section A

    An agricultural cooperative calculates the correlation coefficient (r) between annual rainfall and crop yield to be +0.92.

    How should this result be interpreted?

    Answer options:

    A.

    There is a weak positive linear relationship between rainfall and crop yield.

    B.

    There is a strong positive linear relationship between rainfall and crop yield.

    C.

    Rainfall causes exactly 92% of the changes in crop yield.

    D.

    There is a strong negative linear relationship between rainfall and crop yield.

    How to approach this question

    Look at the sign (+ or -) and the magnitude (closeness to 1 or -1). +0.92 is very close to +1.

    Full Answer

    B.There is a strong positive linear relationship between rainfall and crop yield.✓ Correct
    The correlation coefficient (r) ranges from -1 to +1. A value of +0.92 is very close to +1, indicating a strong positive linear relationship, meaning that as rainfall increases, crop yield tends to increase proportionally. Note that correlation does not prove causation.

    Common mistakes

    Confusing the correlation coefficient (r) with the coefficient of determination (r squared), which explains the percentage of variation.
    Question 08All questionsQuestion 10

    Practice the full ACCA MA — Management Accounting Practice Exam 6

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