The vertical difference, which measures distance between estimated and actual cost for every single observation is classified as __________?
Correct answer: A. residual term
- A. residual term
- B. positive term
- C. negative term
- D. squared term
Explanation
The vertical difference between an actual cost and its estimated cost is called the residual term. Its sign may be positive or negative, while squaring it is a later step in regression analysis.
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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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