A risk manager at Firm SPC is testing a portfolio for heteroskedasticity using the White test. The portfolio is modeled as follows: $Y_i = a + \beta X_{1i} + \epsilon_i$

The residuals are computed as follows: $\hat{\epsilon}_i = Y_i - \hat{\alpha} - \hat{\beta}X_{1i}$

Which of the following correctly depicts the second step in the White test for the portfolio?