The smaller the residual term the:
A)stronger the relationship between the cost driver and costs
B)weaker the relationship between the cost driver and costs
C)steeper the slope of the cost function
D)gentler the slope of the cost function

Question

Quizplus · Accepted Answer

The residual term is the difference between the actual cost and the predicted cost based on the cost driver. A smaller residual term indicates that the predicted cost is closer to the actual cost, which means that the cost driver has a stronger relationship with costs. Therefore, choice A is the best choice.

The Smaller the Residual Term The