The relationship between cost and cost driver is economically plausible if the goodness of fit _________?
Correct answer: A. has meaning
- A. has meaning
- B. has no meaning
- C. has index values
- D. has no index values
Explanation
Economic plausibility requires the goodness-of-fit measure to be meaningful in explaining how the cost driver relates to cost. Merely having index values does not establish that the relationship makes economic sense.
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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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