If the residual error is 35 and the predicted cost value is 20, then the observed cost value will be _________?
Correct answer: A. 55
- A. 55
- B. 15
- C. 65
- D. 85
Explanation
The observed value equals the predicted value plus the residual error: 20 + 35 = 55. A residual may be positive or negative, so its sign must be included in the calculation.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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