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

Question

Quizplus · Accepted Answer

A residual term refers to the difference between actual costs and estimated costs based on the cost driver. So a smaller residual term indicates that the estimated costs based on the cost driver are closer to the actual costs incurred. This suggests a stronger relationship between the cost driver and costs, as the cost driver is better able to explain the variation in costs.

The Smaller the Residual Term,the