When the Constant Variance Assumption Holds,a Plot of the Residual

question 89

Multiple Choice

When the constant variance assumption holds,a plot of the residual versus x:

• A)Fans out
• B)Funnels in
• C)Fans out,but then funnels in
• D)Forms a horizontal band pattern
• E)Suggests an increasing error variance

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Definitions:

Direct Materials Cost

The expense associated with the raw materials directly used in the production of a product.

Cost Behavior Classifications

The categorization of costs based on how they change in relation to changes in a company’s level of activity or volume.

Activity Base

A measure upon which the allocation of costs is based in activity-based costing, often relating to a metric that causes costs to occur such as machine hours or labor hours.

Cost Behavior

The way in which costs change in relation to variations in an organization’s activity level.