_____ measures how much of the fluctuation of a cost is explained by changes in the cost driver.
A)The high-low method
B)The visual-fit method
C)The coefficient of determination
D)Regression analysis

Question

Quizplus · Accepted Answer

The coefficient of determination measures the goodness of fit of a regression model and indicates how well the independent variable (cost driver) explains the variations in the dependent variable (cost). It ranges from 0 to 1, where 1 means that all variations in the cost can be explained by changes in the cost driver, while 0 means that the cost driver has no explanatory power on the cost. The high-low method and visual-fit method are not measures of how well the cost driver explains the cost, but rather methods for estimating the cost equation. Regression analysis is a statistical technique used to estimate the relationship between two or more variables, including cost and cost driver, but it does not specifically measure the explanatory power of the cost driver.

_____ Measures How Much of the Fluctuation of a Cost