The better fit between estimated cost and actual observations is represented by ___________?
Correct answer: D. smaller residual terms
- A. variable residual terms
- B. zero residual terms
- C. larger residual terms
- D. smaller residual terms
Explanation
Residuals are the differences between actual and estimated costs, so smaller residuals indicate that the regression line fits the observations more closely. Larger residuals indicate a poorer fit.
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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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