A quick look at a scattergraph of cost versus activity can reveal that there is little relation between the cost and the activity or that the relation is something other than a simple straight line. In such cases, least square regression is highly recommended for estimating fixed and variable costs.

Question

Quizplus · Accepted Answer

Least squares regression may not be the best method if the relationship between cost and activity is not linear or if there is little relation, as it assumes a linear relationship. Other methods or a reevaluation of the data might be more appropriate in such cases.

A Quick Look at a Scattergraph of Cost Versus Activity