Simple regression analysis output produces a variety of statistics. Which of the following statistics best summarises how well the cost driver explains the behavior 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 the best statistic as it represents the proportion of variance in the dependent variable (cost) explained by the independent variable (cost driver). It takes into account the number of predictors in the model and provides a better measure of the model fit compared to R-square which can be biased if additional predictors are added to the model. T-statistics, p-values and beta coefficients provide information about the significance and direction of the relationship between the variables but do not summarize how well the cost driver explains the behavior of the cost.

Simple Regression Analysis Output Produces a Variety of Statistics