Regression analysis works best when the relationship between costs and cost drivers is:
A) Positive and linear
B) Linear and direct
C) Positive and indirect
D) Positive, linear, and indirect

Question

Quizplus · Accepted Answer

Regression analysis assumes a linear relationship between the dependent variable (costs) and the independent variable (cost driver). Therefore, a positive and linear relationship between the two variables is best for regression analysis to effectively estimate costs based on the activity level of the cost driver.

Regression Analysis Works Best When the Relationship Between Costs and Cost