Goodness-of-fit measures how well the predicted values in a cost estimating equation ________.
A) match the cost driver
B) determine the level of activity
C) match the actual cost observations
D) rely on the independent variable

Question

Quizplus · Accepted Answer

Goodness-of-fit measures how accurately the predicted values in a cost estimating equation align with the actual cost observations. It assesses how well the model fits the data, indicating whether the predicted values accurately represent the real costs. Choice A, matching the cost driver, is partially correct but not comprehensive enough. The cost driver is used to predict costs in the cost estimating equation, but it does not reflect how well the predictions match the actual costs. Choice B, determining the level of activity, is incorrect because the level of activity is determined by the cost driver and is not a measure of how well the model fits the data. Choice D, relying on the independent variable, is incorrect because it does not address the accuracy of the predicted values.

Goodness-Of-Fit Measures How Well the Predicted Values in a Cost