In object-oriented development, all objects in a class inherit the properties of higher classes in the hierarchy. Thus, changes in one object may affect many other objects, and the extent and effects of errors significantly increase. Testing one object provides no assurance that the objects are properly coordinated. Accordingly, user acceptance testing to verify correct functioning of the whole system becomes more important.

Prevention attempts to avoid defective output. Prevention costs include preventive maintenance, employee training, review of equipment design, and evaluation of suppliers. Prevention is less costly than detection and correction of defective output.

The coefficient of determination (r2) measures the percentage of the total variance in cost that can be explained by the regression equation. If the coefficient of determination is .99724, 99.724% of the variance is explained by the regression equation. Thus, the values in the regression equation explain virtually the entire amount of total cost.

The appropriate discount rate the cost of capital used in capital budgeting) theoretically is determined at the intersection of the IOS and MCC schedules. This intersection is at an r..1r-~:0 of IC I% and an optimal capital budget of US $125 million. However, if the optimal capital budget is assumed to be US $150 million, the company is still in the second interval of the MCC schedule. The marginal cost of financing in this part of the schedule is 10%.