The smaller the residual terms,the ________.
A) better is the fit between the actual cost observations and estimated costs
B) weaker the relationship between the cost driver and costs
C) more the number of units produced during the period
D) stronger the relationship between fixed cost and variable cost

Question

Quizplus · Accepted Answer

A small residual term indicates that the actual cost observations are closely clustered around the estimated costs, which means there is a better fit between the actual cost data and the estimated costs. A larger residual term would indicate greater variation or error in the estimation process.

The Smaller the Residual Terms,the ________