Simple regression analysis output produces a variety of statistics. Which of the following statistics best summarizes how well the cost driver explains the behaviour of the cost?
A) T-statistics for alpha and beta coefficients
B) T-statistic and p-value for the alpha coefficient
C) P-values for alpha and beta coefficients
D) Adjusted R-square

Question

Quizplus · Accepted Answer

Adjusted R-square is a measure of how well the independent variable (cost driver) explains the variation in the dependent variable (cost). A higher adjusted R-square indicates a better fit of the regression line, meaning that the cost driver is a better explanation of the cost behavior. The other statistics listed (t-statistics, p-values) are useful for testing the significance of individual coefficients in the regression equation but do not provide an overall measure of how well the cost driver explains the behavior of the cost.

Simple Regression Analysis Output Produces a Variety of Statistics